Skip to Content
Fund Times

Fund Times: Oil ETF Tries to Strike It Rich

Plus news on AIM, Calvert, and more.

Mentioned: , , , , ,

A fund family has staked a claim to offer the first exchange-traded fund based on the world's most actively traded commodity--oil--but it's not one of the complexes you would have expected.

Ameristock Funds, a small Alameda, Calif.-based fund shop known for audacious plans, beat EFT industry behemoths like Barclays Global Advisors and State Street Global Advisors to the punch by filing papers seeking regulatory approval for the New York Oil ETF. The ETF, which will be organized as a limited partnership and run as a commodity pool, will try to track the price of light, sweet crude oil by investing in oil futures contracts and other derivatives traded on the New York Mercantile Exchange, according to a prospectus filed May 16, 2005, with the Securities and Exchange Commission.

The ETF will charge a management fee of 0.4% on the first $1 billion in assets and 0.2% thereafter, according to the prospectus. Nicholas D. Gerber, longtime manager of the  Ameristock Fund (AMSTX), and John Love, who is in charge of marketing for Ameristock, are listed as the ETF's managers in the document. Neither of them have experience running a commodity pool, but Gerber once served as managing director of a futures index fund.

Financial advisors and individual and institutional investors have eagerly awaited another commodity ETF in the wake of the successful launches of two gold offerings in 2004 and early 2005. There is growing interest in using such assets, which tend to be uncorrelated with stocks and bonds, to diversify portfolios. No doubt higher oil prices in recent years also have fueled market demand for such a fund.

It could be a while before investors can use this ETF to slake their thirst for oil, though. The approval process for the first gold ETF,  StreetTracks Gold Shares  (GLD), took more than a year. The SEC is likely to take a good, hard, long look at the Oil ETF proposal, too.

Ameristock's Gerber, who refers to himself as a serial entrepreneur, may be best known for his aborted attempt to convert his Ameristock Focused Value Fund into a publicly traded holding company. He liquidated that fund in January after that proposal took off like a lead dirigible. With all the time Gerber spends indulging his inner entrepreneur, one wonders how much time he has left for shareholders of his Ameristock fund, which has finished near the bottom of the large-value category in each of the last two years.

AIM's CEO Steps Down
AIM announced this week that its CEO, Mark Williamson, will step down as soon as a replacement is found. It's been a rough few years for AIM since Williamson became president and CEO in January 2003 (having come from the INVESCO side, which he joined in 1998). Growth investing largely lost its luster after the Nasdaq meltdown in March 2000, and outflows have plagued AIM ever since the bear market began. What's more, problems at sibling INVESCO and run-ins with regulators have added to AIM's troubles.

Meanwhile, AIM parent  Amvescap (AVZ) will need a CEO, too. CEO Charles Brady expects to leave in 2005, at the behest of investors, and a replacement is expected this summer. (Brady will, however, remain as chairman.) Overall, though, we think AIM and INVESCO shareholders shouldn't see any meaningful changes to their respective funds.

Gimme a (Fee) Break
Calvert, a leader in socially responsible investing, announced the launch of three new funds in a recent SEC filing dated May 18, 2005. The three new funds will be funds-of-funds, using the institutional share class of Calvert's existing lineup. The first, Calvert Conservative Allocation Fund, will invest 60% to 80% of its assets in Calvert Social Investment Bond  (CBDIX), 20% to 40% in various Calvert equity funds, and 0% to 10% in Calvert's Money Market Fund. The second, Calvert Moderate Allocation Fund will invest 50% to 80% in various Calvert equity funds, 20% to 50% in Calvert Social Investment Bond, and 0% to 10% in Calvert's Money Market Fund. Finally, Calvert Aggressive Allocation Fund will invest 80% to 100% in various Calvert equity funds, 0% to 20% in Calvert Social Investment Bond, and 0% to 5% in Calvert's Money Market Fund. The projected costs for the three funds are 1.65%, 1.73%, and 1.8%, respectively. They include a 1.24% fee waiver that expires in June 2006 if not renewed.

Although these funds aren't a bad idea, the projected fees are much too high. In fact, they're at least 50% more costly than their typical category rivals. We're particularly bothered by the 15-basis-point management fee. Other companies that run similar funds-of-funds, such as Fidelity, have eliminated that unnecessary expense, and Calvert should, too.

Derek Taner is no longer managing  Franklin Global Health Care  (FKGHX) per a supplement to a prospectus dated May 1, 2005. We had been cautiously optimistic about this fund's prospects during Taner's short three-year tenure, but with this departure, we're less sanguine about its future. The fund is comanaged by Matthew Willey, who doesn't have much of a track record, Evan S. McCulloch (who also manages  Franklin Biotech Discovery  (FBDIX) and who contributes an occasional biotech idea now and then), and Jeanna Wong, who's relatively new.

Westwood Realty AAA  (WESRX) is getting a name and strategy change. If approved by this small fund's shareholder base, it will change its name to Westwood Income Fund and will jump onto the income bandwagon, focusing more on high current income over capital appreciation. In so doing, it will invest in various types of income-producing equity and fixed-income securities in addition to real estate investment trusts.

Transamerica announced that it will acquire Los Angeles-based Westcap Investors LLC this summer. The deal may be an attempt to replace Transamerica's recently departed growth managers who left for Delaware. Transamerica will pick up 14 investment professionals. Currently, Westcap focuses only on institutional and high net worth clients.

About a dozen years after helping to launch the ETF industry with the  SPDR (SPY), but only a couple of years after watching a competitor seize control of that market, State Street Global Advisors Gus Fleites has left the firm. SSgA will replace Fleites, who served as the firm's head of advisor strategies, with Greg Ehret and James Ross. 

Loomis Sayles Benchmark Core Bond  (LBCRX) was liquidated on May 13, 2005. The fund had a so-so track record and a tiny asset base.

Dieter Bardy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.