WisdomTree announces index change for WTI Crude Oil ETC
WisdomTree has announced a change to the underlying index for its WTI Crude Oil ETC (CRUD) as of August 4, 2020, following a vote by security holders. The new Bloomberg WTI Crude Oil Multi-Tenor Excess Return Index aims to enhance resilience to extreme market conditions by diversifying risk across three WTI futures contracts, rebalanced monthly. This move responds to unprecedented market volatility, including negative prices in WTI contracts, offering better liquidity and reducing concentration risk. WisdomTree holds a 70% market share in European energy ETCs with $2.4 billion in assets under management.
- The new index diversifies risk across three WTI futures contracts, improving liquidity and resilience during extreme market conditions.
- The approach mitigates the risk of futures contracts trading at negative prices, enhancing investor confidence.
- WisdomTree holds a dominant position in the market with a 70% share and $2.4 billion in assets under management.
- None.
NEW YORK, Aug. 04, 2020 (GLOBE NEWSWIRE) -- WisdomTree, an exchange traded fund ("ETF") and exchange traded product ("ETP") sponsor, has today announced a change to the underlying index tracked by WisdomTree WTI Crude Oil ETC (CRUD), following a vote by security holders. The index change was completed on August 4, 2020 and is exclusive to WisdomTree.
The new index, the Bloomberg WTI Crude Oil Multi-Tenor Excess Return Index, is the result of extensive work between WisdomTree and Bloomberg to create an index which would be resilient to extreme conditions in the WTI Crude Oil market. The index aims to track the performance of an equal-weight basket of three WTI Crude Oil future contracts and is rebalanced monthly.
Alexis Marinof, Head of Europe, WisdomTree, said: “CRUD is the largest and most liquid oil ETC in Europe, and WisdomTree is committed to ensuring that it provides the best oil investment experience in the industry. We have just endured a period of unprecedented market volatility with markets exhibiting new types of disruptions that were never before seen, including the appearance of negative prices in WTI contracts.”
By moving CRUD to an index that spreads risk among three WTI contracts, WisdomTree is aiming to provide investors with greater future protection from the type of extreme conditions we have seen this year. In particular, the new index was designed by WisdomTree to offer greater resiliency with respect to negative or zero prices as well as enhanced liquidity for CRUD in these scenarios.
The approach continues to maintain exposure and performance that is towards the front of the futures curve, which should allow investors to continue to use CRUD both strategically and tactically. The new index has also shown historically reduced performance drag when oil is in contango, which can be a concern for investors.
Alexis Marinof added: “We have listened to investor feedback, working tirelessly with our partners to ensure CRUD is more robust than ever. We will continue to look at enhancing our product suite ensuring we offer the most comprehensive and robust range of energy ETCs for investors.”
While WisdomTree’s WTI Crude Oil ETCs did not face the prospect of having to replicate a negative price as they were tracking slightly further-dated futures contracts, the unprecedented events of April 2020 highlighted that it is possible for futures contracts to trade at a negative price. The changes made will mitigate the risk of the index going negative.
The new index has a price floor at zero and, unlike other indices tracked by oil ETCs, cannot go negative. For the new index to reach the zero floor, the average price of the three futures contracts would need to drop below zero compared to only one futures contract with the previous index. With exposure to WTI Crude Oil diversified across multiple contracts instead of only one, CRUD will also benefit from improved liquidity and reduce the concentration in a given futures contract.
Jarrett Lilien, President and COO, WisdomTree, concluded: “We have just experienced one of the most challenging market environments ever. Our team managed through it, and we remained true to our heritage, using it as an opportunity to innovate. The result is a best in class product designed to endure extreme market conditions, helping investors navigate the financial markets.”
WisdomTree is the leader in European energy ETCs1, with a
For further information, please contact:
Arran Fano, PR and Communications, +44 20 7448 4336 / AFano@WisdomTree.com
Jessica Zaloom, Head of Corporate Communications and Public Relations, +1 917 267 3735 / JZaloom@wisdomtree.com
About WisdomTree
WisdomTree Investments, Inc., through its subsidiaries in the U.S. and Europe (collectively, “WisdomTree”), is an exchange-traded fund (“ETF”) and exchange-traded product (“ETP”) sponsor and asset manager headquartered in New York. WisdomTree offers products covering equities, fixed income, currencies, commodities and alternative strategies. WisdomTree currently has approximately
WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.
Important Information
Communications issued in the European Economic Area (“EEA”): This document has been issued and approved by WisdomTree Ireland Limited, which is authorised and regulated by the Central Bank of Ireland.
Communications issued in jurisdictions outside of the EEA: This document has been issued and approved by WisdomTree UK Limited, which is authorised and regulated by the United Kingdom Financial Conduct Authority.
WisdomTree Ireland Limited and WisdomTree UK Limited are each referred to as “WisdomTree” (as applicable). Our Conflicts of Interest Policy and Inventory are available on request.
For professional clients only. Past performance is not a reliable indicator of future performance. Any historical performance included in this document may be based on back testing. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. The value of any investment may be affected by exchange rate movements. Any decision to invest should be based on the information contained in the appropriate prospectus and after seeking independent investment, tax and legal advice. These products may not be available in your market or suitable for you. The content of this document does not constitute investment advice nor an offer for sale nor a solicitation of an offer to buy any product or make any investment.
_________________________
1By AuM, as of July 29, 2020
An investment in ETPs is dependent on the performance of the underlying index, less costs, but it is not expected to match that performance precisely. ETPs involve numerous risks including among others, general market risks relating to the relevant underlying index, credit risks on the provider of index swaps utilised in the ETP, exchange rate risks, interest rate risks, inflationary risks, liquidity risks and legal and regulatory risks.
The information contained on this document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares in the United States or any province or territory thereof, where none of the issuers or their products are authorised or registered for distribution and where no prospectus of any of the issuers has been filed with any securities commission or regulatory authority. No document or information on this document should be taken, transmitted or distributed (directly or indirectly) into the United States. None of the issuers, nor any securities issued by them, have been or will be registered under the United States Securities Act of 1933 or the Investment Company Act of 1940 or qualified under any applicable state securities statutes.
This document may contain independent market commentary prepared by WisdomTree based on publicly available information. Although WisdomTree endeavours to ensure the accuracy of the content in this document, WisdomTree does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this document make no warranties or representation of any kind relating to such data. Where WisdomTree has expressed its own opinions related to product or market activity, these views may change. Neither WisdomTree, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents.
This document may contain forward looking statements including statements regarding our belief or current expectations with regards to the performance of certain assets classes and/or sectors. Forward looking statements are subject to certain risks, uncertainties and assumptions. There can be no assurance that such statements will be accurate and actual results could differ materially from those anticipated in such statements. WisdomTree strongly recommends that you do not place undue reliance on these forward-looking statements.
WisdomTree Commodity Securities Limited
The products discussed in this document are issued by WisdomTree Commodity Securities Limited (the "Issuer"). The Issuer is regulated by the Jersey Financial Services Commission. Investors should read the prospectus of the Issuer before investing and should refer to the section of the prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in the securities offered by the Issuer.
Securities issued by the Issuer are direct, limited recourse obligations of the relevant Issuer alone and are not obligations of or guaranteed by Citigroup Global Markets Limited (“CGML”), Citigroup Global Markets Holdings Inc. (“CGMH”), Merrill Lynch International ("MLI"), Bank of America Corporation ("BAC") or any of their affiliates. Each of CGML, CGMH, MLI and BAC disclaim all and any liability whether arising in tort, contract or otherwise which they might have in respect of this document or its contents otherwise arising in connection herewith.
Bloomberg® and the Bloomberg Commodity IndexesSM are service marks of Bloomberg Finance L.P. and its affiliates (collectively, “Bloomberg”) and have been licensed for use by the Issuer. Although the securities issued by the Issuer are based on the Bloomberg Commodity IndexesSM, neither Bloomberg nor UBS Securities LLC and its affiliates (collectively “UBS”) are affiliated with the Issuer and Bloomberg and UBS do not approve, endorse, review, or recommend such securities. Neither Bloomberg nor UBS guarantees the timeliness, accurateness, or completeness of any data or information relating to the Bloomberg Commodity IndexesSM and make no representation regarding the advisability of investing in such product(s).
FAQ
What is the new index for WisdomTree WTI Crude Oil ETC (WETF)?
How does the new index benefit investors in WETF?
What prompted the change in the underlying index for WETF?
How does the new index handle negative prices?
What market share does WisdomTree hold in energy ETCs?
