XShares Advisors LLC has launched what it says is the first U.S. traded product providing
exposure to the fast growing carbon market by holding European Union Allowances
(EUAs) futures contracts.
AirShares EU Carbon Allowances Fund (NYSE Arca: ASO) is a commodity pool that seeks to provide
investors with investment results generally corresponding, before payment of the fund’s
expenses and liabilities, to the performance of a basket of exchange traded futures
contracts of EUAs.
An EUA is an entitlement to emit one metric ton of carbon dioxide
equivalent that is transferable under the European Union Greenhouse Gas Emissions
Trading Scheme (EU ETS).
Although ASO is a commodity pool, it provides investors
with the flexibility of intra-day trading and the ability, for example, to buy on margin or
go short.
During the first nine months of 2008, the global carbon market grew 81% to $87 billion
and is on track to clear $100 billion by year end, according to New Carbon Finance
research released October 2008.
Initially, ASO’s portfolio holds unleveraged long positions in ICE Futures
(Intercontinental Futures Exchange) or European Climate Exchange Carbon Financial
Instrument Futures Contracts (ECX CFI Futures Contracts). Each contract provides for
delivery of 1000 EUAs at a specified price.
The EUA futures contracts ASO invests in will expire in December of years 2009
through 2012. As contracts approach their December expiration, the fund sells expiring
contracts and replaces them with contracts of later expirations. ASO also seeks to hedge
the currency risk associated with fluctuations in the Euro/U.S. dollar exchange rate.
AirShares is a passively managed, equity product and does not track an index. Although
the futures contracts held by the fund and most of its assets are denominated in Euros, the
shares trade in U.S. dollars.
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