New ETFs Off to Roaring Start
In a mere 10 trading days, the newly launched ETF Securities Physical Platinum Shares(PPLT) and Physical Palladium Shares(PALL) have amassed more than $500 million in assets.
The new physically backed platinum and palladium ETFs are the most recent funds from ETF Securities, a global ETF issuer. PALL and PPLT are the first U.S.-traded funds to offer investors exposure to bullion-backed platinum and palladium trusts.
It is not surprising that investors have gravitated to these new precious metals ETFs, or that ETF Securities was the first firm to debut such funds in the U.S. ETF Securities launched the first physically backed gold ETFs in Australia and London in 2003. SPDR Gold Shares(GLD), the first physically backed gold fund in America, is currently the second-largest ETF by assets in the U.S.
ETF Securities launched its first two U.S.-traded funds in 2009 — the firm’s own physically backed gold and silver funds, designed to compete with entrenched U.S. competitors like GLD and iShares Silver(SLV). As of Jan. 25, the ETFs Physical Silver Shares(SIVR) and ETFs Physical Gold Shares(SGOL) had attracted approximately $134 million and $335 million in U.S. assets respectively.
“We’re excited to be able to bring this unique offering to the US ETF market,” noted William Rhind, head of sales & marketing for ETFS Marketing LLC. “We have seen good demand and investor interest in all four physically backed ETFs; SGOL, SIVR, PPLT & PALL.”
“Investors should think about investing in platinum and palladium as they typically exhibit a higher volatility than gold and are more geared to a global economic recovery,” Rhind added.
The highly anticipated platinum and palladium funds offer the same transparency and convenience of their familiar gold and silver peers. Rather than having to gain exposure to precious metals through jewelry, coins or futures contracts, investors can use physically backed ETFs to track the price of rare and expensive commodities.
While there has been some resistance to the new funds among the small group of buyers and sellers who formerly dominated the U.S. platinum marketplace, early asset flows indicate that investors are embracing these new investment vehicles.
The remarkable popularity of physically backed gold ETFs — GLD had more than $40 billion in assets at the end of 2009 — has led precious metals to be an asset class onto itself. Investors looking to protect against inflation, deflation or global meltdown can all scoop up shares of precious metals ETFs to ease concerns.
PALL and PPLT provide another tool for investors looking to diversify their precious metals holdings. While gold, platinum and palladium are all precious metals with limited supply, platinum’s and palladium’s industrial utility set these metals apart.
Ownership of PPLT and PALL can be viewed as more than a bullish bet on the price of these metals. The majority of platinum and palladium is used in the creation of catalytic converters. As emissions standards worldwide tighten, PALL and PPLT will reflect the demand for these “industrial” metals.
PPLT also serves as a good proxy for South Africa. The majority of the world’s platinum comes from South Africa, but a volatile political situation and locally priced equities keep many investors from venturing into that developing market.
ETFs continue to allow investors daily access to specific market segments. Investors should consider these funds when assessing their precious metals holdings, and watch these funds as they reflect the global demand for platinum and palladium.
