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Tuesday, December 15, 2009

Grantor Trust Exchange Traded Funds

Exchange traded grantor trust funds can be defined as investments in a changeless basket of investment agents. The investment vehicles are such that they may consist of common stocks or commodities and would enable access to a particular indutry or sector. Exchange grantor trusts trade on an exchange. The trade resembles that of stocks.

There are some key differences between the trading of grantor trust ETFs and that of other ETFs.
  • Grantor trust ETFs usually do not track any indexes or market.
  • The ETF portfolio is fixed; there is no periodic portfolio rebalancing; the original assets stay fixed.
  • Grantor trust ETFs often hold physical commodities like gold and other precious metals, currencies, etc.
  • Some grantor trust ETFs can also hold securities; as the portfolio is fixed over time the portfolio can become more concentrated as companies grow, acquire and merge.
  • Like unit investment trusts, grantor ETFs directly distribute dividends to shareholders. There is no reinvesting.
  • They are also not usually SEC registered investment companies.
  • As there is almost no portfolio management costs, grantor ETFs have very low expense ratios.
Grantor trust exchange traded funds are created to overcome the limitation of holding physical commodities in an ETF portfolio. Investors can use them to get access to specific market sectors or commodities. Grantor trust ETFs can be good instruments for long-term investments but are not suited for very short-term trading.

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posted by NobleTrading at 8:47 AM

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