New ETF Charges Up Niche
Source: The Wall Street Journal, Carolyn Cui (7/19/10)
"Companies are launching funds tracking obscure markets."
MC Capital provided seed money to New York-based Global X Management Co. to start the ETF, and will receive half the ETF's profits.
Global X Lithium is part of a trend in which ETF firms are joining forces with other companies to launch funds that track obscure parts of the financial markets.
"It's harder and harder to come up with simple, obvious and good ideas," said John Hyland, chief investment officer of U.S. Commodity Funds, which runs eight energy ETFs, including the U.S. Oil Fund and U.S. Natural Gas Fund.
In the U.S., there were 914 listed ETFs at the end of June, up 21% from a year ago, according to the National Stock Exchange, a data provider. Since 2007, ETFs have raked in $480 billion in net cash inflows, bringing total assets to $780 billion.
Initially, ETFs were based on broad indexes like the Standard & Poor's 500-stock index; then, they expanded to track industry groups and markets such as gold or oil. Now, they are finding smaller niches.
The highly reactive metal isn't traded on any commodity exchange. Companies producing lithium are either multinationals where lithium accounts for only a small portion of their businesses or nascent miners where production still is years away.
Lithium prices have tripled since 1999, according to Credit Suisse. Global demand for the metal is expected to more than double by the end of this decade, according to TRU Group Inc., a Toronto independent consultant specializing in lithium.
"What everybody wants to achieve is to build the best and most representative index for lithium," said Bruno del Ama, chief executive of Global X Management.