January 22, 2013 / 7:04 AM / 5 years ago

ETF launches Swiss franc-hedged exchange-traded commodities

* ETF Securities lists its first ETCs in Switzerland

* Currency hedge to cut dollar risk from commodities bets

* Hedge provides implicit put on euro-Sfr in crisis scenario

By Martin de Sa‘Pinto

ZURICH, Jan 22 (Reuters) - ETF Securities is to launch a string of products on the Swiss exchange on Tuesday designed to cut the risk of exposure to currency fluctions for commodities investors in Switzerland.

The London-based issuer of exchange-traded commodities (ETCs), which give investors exposure to products such as coffee, oil or nickel without having to hold them, said it was listing 28 Swiss-franc hedged commodities securities on the SIX Swiss Exchange.

“If investors don’t want a currency view or are agnostic about the forex market, these products take a lot of complexity out of commodities investing, as most commodities are priced in U.S. dollars,” ETF Securities senior analyst Martin Arnold said.

That will allow investors to capture more precisely the performance of commodities such as wheat or sugar, while eliminating the effect of fluctuations in the dollar on returns.

“If there’s smooth sailing, you’re going to get a zero return on currency exposure, rather than a potential gain or a loss if you’re unhedged,” Arnold said.

This is ETF’s first launch of commodity ETCs in Switzerland. At the end of 2012, the group was responsible for almost $29 billion in global investor assets.

Conservative European investors outside of Switzerland who want exposure to commodities but wish to avoid hedging prices against the euro for fear of a break-up of the euro zone may also see a benefit in the new products.

“If you are a European investor with money in Switzerland, there is no cost to having a Swiss franc-hedged product rather than a euro-hedged product,” said Arnold.

“And in a worst case scenario and a break-up of the euro zone, you have an implicit put on the euro-Swiss franc at no additional cost.”

Rima Haddad, ETF head of Swiss sales, said investors could also use the products as directional currency bets alongside their commodities exposure when they think the Swiss franc will rally against the U.S. dollar. (editing by Jane Baird)

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