Teucrium’s Gilbertie: Get Ags With TAGS
April 05, 2012
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In response to a blog written by IndexUniverse ETF Analyst Carolyn Hill posted to our website on April 3, 2012, we have invited Teucrium Trading’s Sal Gilbertie, president and chief investment officer, to an interview with IndexUniverse.com. The conversation is as follows.
IndexUniverse: Why did Teucrium Trading file an 8-K on April 4, 2012, clarifying certain statements in the article “Why I Won’t be Buying TAGS"?
Gilbertie: As a result of the article referenced, from which, in Teucrium’s view, investors might infer that, as described in the article—“TAGS pretty much hid its expense ratio…”—Teucrium filed the 8-K to ensure that investors have complete information needed to evaluate this article. The 8-K can be found on the TAGS website, www.teucriumtagsfund.com.
The fundamental purpose of TAGS is to provide a method for investors to diversify by investing indirectly in the underlying funds—(NYSEArca: CORN), (NYSEArca: SOYB), (NYSEArca: CANE) and (NYSEArca: WEAT). In this regard, the fund’s prospectus contains extensive disclosure about the underlying funds, which Teucrium Trading believes makes clear to investors that the underlying funds are separate funds.
TAGS provides a mechanism by which an investor can achieve diversification in the underlying funds. If an investor were ambivalent to the rebalancing feature of TAGS, then the investor would not need to buy TAGS. Instead an investor could purchase the underlying funds directly and would then not have to pay the direct fees, identified as an estimated 0.32 percent, associated with TAGS. However, in either case, the investor would pay fees associated with the underlying funds.
In part, the article focused on management fees paid to Teucrium Trading. By way of clarification, there is no direct management fee paid by the fund to the sponsor. There is an annual management fee of 1.00 percent based on the average daily net assets of each underlying fund that is deducted from such underlying fund’s assets, which were disclosed six different places in the prospectus.
The article also refers to other direct and indirect expenses paid by investors in the fund. The total expense ratio is disclosed and discussed on page 34 of the fund’s prospectus. The disclosure in this section, and in the fees to be paid by the fund and the underlying funds on page 70, together, in the view of Teucrium Trading, provide full and fair disclosure of the total fees, direct and indirect, and identified as an estimated 1.60 percent on page 34 of the prospectus.
Teucrium takes its role as a sponsor of publicly traded funds seriously and endeavors to provide all investors access to agricultural and energy commodities through accessible, thoughtfully designed and managed exchange-traded products.
In addition to the prospectus disclosure discussed above, Teucrium Trading posts each evening to the website for each underlying fund and TAGS, all holdings, closing prices, pending trades, trade prices, number of pending creation baskets and redemption baskets, if any, in addition to net asset value, net asset value per share at 4 p.m. Eastern time closing price and 4 p.m. bid/ask midpoint. Teucrium Trading believes this provides investors complete transparency in its holdings each trading day.