Many investors have just about had it with stocks. And with ETF innovation continuing at breakneck pace, you can invest in markets that have just about nothing to do with investments you're familiar with.
For example, the AirShares EU Carbon Allowances Fund
Inception date: Dec. 15, 2008
Expense ratio: 0.85%
Net assets: $5 million
In contrast to a traditional ETF such as the SPDR
Fund prospects and risks
The limited experience of the fund's manager and commodity trading advisor, who is responsible for trading the fund's futures contracts, are factors which may restrict the success of the fund. The trading activities of the fund also subject shareholders to currency risk, since the prices of EUAs and related futures contracts that the fund invests in are denominated in Euros. Additionally, futures trading can incur trading losses, which may reduce the value of the fund quickly. Whether the fund achieves capital gains or losses, an investment in a commodity fund is different from stock and bond investing, so it would be a good idea to consult your tax adviser about possible tax consequences.
In addition, because the fund is a commodity pool, shareholders do not have the protections provided to ETF shareholders under the Investment Company Act of 1940. Commodity trading is speculative, and the fund may not be suitable for many investors.
Unlike its direct competitor, the iPath Global Carbon ETN (GRN), the Airshares fund does not carry counterparty risk, which is a huge difference in these uncertain credit markets.
According to the World Bank, the global carbon market grew to a $64 billion market in 2007, more than doubling from 2006.
That rapid growth did not go unnoticed, as Morgan Stanley
In a further indication of how much carbon trading has been impacted by the global economic slowdown, Credit Suisse
Even with the slowdown, the Kyoto Protocol requires ratifying nations to reduce their emissions of greenhouse gases or engage in emissions trading if they maintain or increase emissions of those gases. Companies with European operations could be impacted by emissions controls, such as global power company AES