New ETF Takes Both Sides Of The Commodities Trade

Long/short is a popular strategy in the hedge fund community and one made accessible to investors of all stripes by the exchange traded funds industry. Typically, long/short ETFs are equity-based, but investors can now take both sides of the commodities trade with the First Trust Alternative Absolute Return Strategy ETF FAAR.

The actively managed First Trust Alternative Absolute Return Strategy ETF, which debuted Thursday, “seeks to provide investors with long-term total return by investing primarily in exchange-listed commodity futures contracts through a wholly-owned subsidiary of the fund,” according to a statement issued by First Trust.

FAAR invests in commodities futures. Current long positions in the new ETF include soybeans, feeder cattle, corn, Brent crude, cocoa, silver, platinum, cotton and nickel.

Unlike other commodities exchange traded products that subject investors to pesky K-1 tax forms, investors in FAAR will receive 1099s at tax time.

“Absolute return offers the potential to provide long-term total return in a variety of market environments. Additionally, the strategy may offer low or no correlation to equities, bonds, real estate and long-only commodities,” said John Gambla, CFA, FRM, PRM and Senior Portfolio Manager for the Alternatives Investment Team at First Trust, in the statement.

FAAR's short positions include natural gas, wheat, West Texas Intermediate crude, sugar, gasoline, lead and aluminum.

The new ETF charges 0.95 percent per year, or $95 for every $10,000 invested.