BGI Files for Commodity Index ETF
By Journal of Indexes Staff

BGI solidified its position as the leader of the ETF industry on July 22 by becoming the first ETF provider to file for a broad-based commodities fund in the United States. The new fund will be based on the Goldman Sachs Commodities Index (GSCI). The use of the GSCI may limit the utility of the product, as among all available commodity indexes, the GSCI offers the least diversified exposure-it is heavily dominated by the Energy sector, which re p resents approximately 75 percent of the index. Of course, that could play into BGI's hands, as the ETF will serve as an easy proxy for direct exposure to the price of oil.

The ETF will invest in GSCI futures, which trade regularly on the Chicago Mercantile Exchange (CME). The fund will use a special kind of future recently created by the CME called a "CERF," which carries a five-year expiration date, limiting the need to turn over contracts constantly. Similar contracts do not exist for the other popular commodity indexes.

BGI set the initial expense ratio for the fund at 0.75 percent. That's high for an ETF, but well below the expense ratios of most commodity mutual funds.