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Samsung AM changes index of oil ETF in HK

The firm is hoping to mitigate concentration risk arising from the holding of a single month WTI futures contracts.

Samsung Asset Management Hong Kong has decided to change the underlying index of its S&P GSCI Crude Oil ER Futures ETF, effective on 7 August, according to an exchange filing.

The new index will be changed to the S&P GSCI Crude Oil Multiple Contract 55/30/15 1M/2M/3M (USD) ER Index from the current S&P GSCI Crude Oil Index Excess Return.

“The change of underlying index will mitigate the concentration risk arising from the holding of a single month WTI futures contracts by the fund,” the statement said.

The move comes after the price of the West Texas Intermediate (WTI) oil futures plunged in April. At the time, the one-year performance of the Samsung S&P GSCI Crude Oil ER Futures ETF fell   -85.82%, according to data from FE Fundinfo. During the same month, the firm issued a statement saying that it will closely monitor the situation and will also consider alternative solutions, including having a discussion with S&P Dow Jones Indices about the possibility of changing the index.

Year-to-date, the product continues to be on negative territory at -77.84% (see below).

The ETF’s new index is a sub-index of the S&P GSCI Multiple Contract Index, which is a standardised, long-only version of the S&P GSCI that holds multiple contract months for each of the S&P GSCI commodities, the firm noted in the filing.

Samsung AM added that from the effective date, the investment strategy of the fund will also be changed.

The firm will continue to adopt a full replication strategy for the ETF, but under exceptional circumstances, it may, in its absolute discretion and without prior notice to investors, deviate from the full replication strategy and implement alternative investment strategies, which may include investing in WTI futures contracts other than those constituting the new index, underwriting or overwriting certain WTI futures contracts and using financial derivative instruments for hedging instruments, it said.

The cap for margin used to acquire the WTI futures contracts will also be increased to 50% from 20% of the ETF’s AUM, while the threshold for investment in cash will be reduced to 50% from 80% of the fund’s AUM, it added.

The Samsung S&P GSCI Crude Oil ER Futures ETF vs category average year-to-date

Source: FE Fundinfo. In US dollars.

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