Given the low correlation of timber to other asset classes and two existing company-based ETFs, investors may be interested in a new idea for a commodity pool fund which tracks the global price of lumber and wood pulp. A new commodity pool fund could be structured as follows to trade near-month futures contracts (or the closest available month to the near-month) for lumber (Lumber futures will account for 67 – 75% of the portfolio based on higher average trading volumes than pulp) and wood pulp (Wood Pulp futures will account for 25 – 33% of the portfolio) from any available global, exchange-traded futures contract product (with currently traded products listed below):
a.) CME Globex: Northern Bleached Softwood Kraft Pulp (WP)
b.) ICEX: ICE Futures US Pulp Futures (P)
c.) CME Random Length Lumber Futures (LB)
Existing company-based ETFs for timber include the Claymore Clear Global Timber Index (CUT) and the iShares S&P Global Timber & Forestry Index (WOOD). Since both of these funds invest in the stocks of companies involved in paper, pulp, and timber; their returns over time would be more correlated to the overall stock market versus a commodity pool fund which is based on the actual price of lumber and wood pulp through exchange-traded futures contracts.
$18.98 (10/21/08)
