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Friday, May 06, 2011

A New ETF Taps Into Oil Globally

Reported by Neil Anderson, Managing Editor

Even as the price of oil dipped below $100 per barrel yesterday, IndexIQ [see profile] unveiled a new offering to tap into small cap firms in the oil business.

The new fund, the IQ Global Oil Small Cap ETF, carries an expense ratio of 75 basis points. Julie Abbett, head of portfolio management and senior vice president at the Rye Brook, New York-based firm, PMs the new, NYSE-Arca-listed ETF (IOIL). ALPS handles distribution.

IndexIQ claims that new ETF is the first global small-cap ETF focused on the oil business. It tracks the IQ Global Oil Small Cap Index, which is both float-adjusted and market capitalization-weighted.

"Our two most recent launches, IOIL and CROP [an agricultural small cap ETF IndexIQ unveiled a month ago], reflect our continued belief that investors can find significant opportunities in the demand that currently is permeating the commodities space," stated Adam Patti, CEO of IndexIQ. "And we strongly believe that small capitalization companies offer the most effective avenue for translating that demand into significant growth."

Company Press Release

RYE BROOK, New York, (May 5, 2011) – IndexIQ, a leading developer of index-based liquid alternative investment solutions, is introducing the IQ Global Oil Small Cap ETF (NYSE Arca: IOIL), it was announced today.

IOIL is the first global small-cap Exchange-Traded Fund (ETF), designed to provide pure play exposure to companies that are primarily engaged in the oil industry. This includes firms involved in exploration and production (E&P); refining and marketing; and equipment, services and drilling. It seeks to track, before fees and expenses, the performance of the IQ Global Oil Small Cap Index (Bloomberg Index Ticker IQSMOIL).

The price of oil has risen 23 percent this year and gasoline has climbed to a 33-month high, spurred by a number of factors including the still unfolding unrest that has swept across the Middle East. This dramatic price appreciation has driven the price of crude oil over $100 a barrel, which is having a significant impact on industries and consumers who are trying to keep pace with rising prices at the pump.

“Rising oil prices have wide-ranging repercussions, but it also offers opportunities for investors. Investors interested in oil company exposure historically have been limited in their choices to funds that contain exposure to both the oil and natural gas industries, or to commodities that offer very different return profiles,” said Adam Patti, chief executive officer with IndexIQ. “That approach is fine if one is looking for a way to add broad energy exposure, but not if a specific, concentrated oil industry play is what’s being called for.”

Patti added “IOIL is focused on the global oil sector because non-US companies increasingly control the industry, drive the majority of the industry revenue, and control the vast majority of proven reserves. U.S.- based oil companies increasingly are at a disadvantage when competing against foreign entities in closed economies. Additionally, we believe the small-cap segment of this and many markets holds the greatest potential for investors since these companies typically are better positioned for growth than their large cap competitors.”

Patti went on to note that the IQ Global Oil Small Cap Index provides strikingly accurate tracking to spot oil prices. Additionally, IOIL investors will never receive a K-1, an important consideration at tax time.

The IQ Global Oil Small Cap Index is float-adjusted and market capitalization-weighted. To be included in the index, companies must have a minimum average market capitalization of $150 million for the prior 90- day period. Stocks are required to have a minimum average daily trading volume of at least $1 million for the prior 90 days, and a minimum monthly volume of 250,000 shares for the prior six months. The Index’s components and their respective weights are rebalanced quarterly.

As of April 11, 2011, the index had sector allocations in refining & marketing (40.46 percent), exploration & production (36.90 percent) and equipment & services (22.64 percent); while the top three countries were the United States (45.08 percent), Canada (11.67 percent) and Thailand (7.46 percent).

The launch of IOIL comes approximately one month after IndexIQ launched the IQ Global Agribusiness Small Cap ETF (NYSE Arca: CROP), another first of its kind fund that provides exposure to the fast-growing agribusiness sector.

“Our two most recent launches, IOIL and CROP, reflect our continued belief that investors can find significant opportunities in the demand that currently is permeating the commodities space,” continued Patti. “And we strongly believe that small capitalization companies offer the most effective avenue for translating that demand into significant growth. We have been very pleased with the marketplace’s reaction to CROP and we’re excited to be following that launch with IOIL.”

In addition to IOIL, IndexIQ has a robust suite of commodities and natural resources ETFs including:
  • IQ Global Resources ETF (NYSE Arca: GRES), the first global natural resources ETF;
  • IQ Global Agribusiness Small Cap ETF (NYSE Arca: CROP), the first global agribusiness small cap ETF
  • IQ Canada Small Cap ETF (NYSE Arca: CNDA), the first Canada small cap ETF;
  • IQ Australia Small Cap ETF (NYSE Arca: KROO), the first Australia small cap ETF;

    IndexIQ is also the sponsor of a number of index-based liquid alternative investment products designed to “democratize” the alternative investment landscape, including:
  • IQ Alpha Hedge Strategy Fund (IQHIX – Institutional Share Class; IQHOX – Investor Share Class), the first open-end, no-load Hedge Fund Replication mutual fund;
  • IQ Hedge Multi-Strategy Tracker ETF (NYSE Arca: QAI), the first US- listed Hedge Fund Replication Exchange-Traded Fund;
  • IQ Hedge Macro Tracker ETF (NYSE Arca: MCRO), the first Global Macro Hedge Fund ETF;
  • IQ Merger Arbitrage ETF (NYSE Arca: MNA), the first Merger Arbitrage ETF;
  • IQ Real Return ETF (NYSE Arca: CPI), the first US-listed “Real Return” ETF, which seeks to generate a real return above the rate of inflation as measured by changes in the Consumer Price Index;
  • IQ South Korea Small Cap ETF (NYSE Arca: SKOR), the first South Korea small cap ETF;
  • IQ Taiwan Small Cap ETF (NYSE Arca: TWON), the first Taiwan small cap ETF.

    IndexIQ products are designed to be liquid, transparent, low cost, and accessible to a broad rangeof investors.*

    About IndexIQ

    Based in Rye Brook, New York, IndexIQ is a leading developer of index- based liquid alternative investment solutions that combine the benefits of traditional index investing with the risk-adjusted return potential sought by the best active managers. The company’s philosophy is to democratize investment management by making innovative alternative investment strategies available to investors in low cost, liquid and transparent products. IndexIQ strategies are marketed through the company’s proprietary investment products and select partnerships with leading global financial institutions. Additional information about the company and its products can be found at www.IndexIQ.com.

    *Ordinary brokerage commissions apply. IndexIQ’s ETF holdings are available daily on IndexIQ’s website. ETFs are liquid in that they are exchange-traded.

    As IOIL’s investments are concentrated in the oil sector, the risks and hazards inherent in the industry may cause the price of crude oil to widely fluctuate, which may have a negative effect on oil companies. Government regulation may impact the price of crude oil and the performance of oil companies. The Fund is susceptible to foreign securities risk. Since the Fund invests in foreign markets, it will be subject to risk of loss not typically associated with domestic markets. The Fund is concentrated in small capitalization companies, whose stock prices generally are more volatile than those of larger companies and also are more vulnerable than those of large capitalization companies to adverse business and economic developments. Both the Fund’s ability to track its Index and Fund returns in general may be adversely impacted by changes in currency exchange rates. The ETF is new and has limited operating history. The fund is not suitable for all investors. Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund's Shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk and the Fund does not represent a complete investment program.

    Investors are reminded that all investing involves risk, including possible loss of principal. Consider the Funds’ investment objectives, risks, charges and expenses carefully before investing. A prospectus with this and other information about the Funds may be obtained by visiting www.indexiq.com or by calling (888) 934-0777. Read the prospectus carefully before investing.

    The Funds are distributed by ALPS Distributors, Inc. (ALPS), which is not affiliated with IndexIQ. Adam Patti is a registered representative of ALPS. 

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