WisdomTree Investments is preparing for the launch of a new actively-managed ETF called the WisdomTree Dreyfus Commodity Currency Fund (NYSE:CCX), listed on the NYSE. WisdomTree filed a Form 8-A for registration of the securities for the fund, which is one of the final stages in development, prior to an ETF hitting the market.  Just last week, the company known for its array of currency ETFs, had filed a detailed prospectus for CCX as well.

Fund Details

The Commodity Currency Fund aims to provide investors with returns that are reflective of money-market rates in commodity-producing countries and changes to the values of those countries’ currencies relative to the US dollar. The “commodity-producing countries” that CCX will be looking to provide exposure to include Australia, Brazil, Canada, Chile, Indonesia, Mexico, New Zealand, Norway, Russia and South Africa. Each of these countries is a major commodity producing nation, relying heavily exports like metals, livestock, energy and agriculture. A notable caveat is that the portfolio managers, Dreyfus Corporation, will not invest in currencies that follow a fixed-exchange rate regime. In other words, if the currencies are pegged to the value of another currency like the US dollar, than the fund will not invest in them – examples include China, Saudi Arabia and the UAE.

CCX will have an expense ratio of 0.55% and will achieve its currency exposures primarily through investments in forward currency contracts, currency swaps and interest rate swaps. The fund will essentially be much like the existing WisdomTree Dreyfus Emerging Currency Fund (NYSE:CEW), which invests in a basket of emerging market currencies. Except that CCX will invest in a different category of currencies, in this case, currencies of commodity-producing countries.

What’s in it for the investor?

CCX will help investors achieve dynamic exposure to money-market returns from commodity-producing currencies. Investors will be earning two distinct returns – the first will be money-market rates of return in the country being targeted, and the second will be the return on the local currency of that target country. By targeting those countries which are commonly identified with the production and export of commodities, investors expose themselves to currencies with positive commodity exposure. As demand and price for these commodities rises, more money would flow into these economies, from higher priced commodity exports. The increased demand for the currency and positive growth resulting in those economies would generally be supportive of appreciation in the currency.

Of course, if investors have a bearish outlook on the commodity sector, this product could also be a useful instrument as part of a short play on currencies of commodity-producing countries.

CCX has a unique proposition to offer investors, much like the Emerging Currency Fund (CEW), and will likely attract investor assets once it’s launched.

Written By Shishir Nigam from ActiveETFs | InFocus

Shishir Nigam is the founder of ActiveETFs | InFocus (http://www.etfshub.com/), which provides extensive coverage and analysis of actively-managed ETFs in US and Canada, including debates on major industry trends, insights on the latest product launches from issuers in the Active ETF space as well as in-depth interviews with industry executives and thought leaders.

Disclosure: No positions in above-mentioned names.
 
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