POSITION: Founder and chairman, ETF Securities
EDUCATION: Bachelor of Economics and a Bachelor of Laws degree, Australian National University.
Graham Tuckwell pioneered commodity exchange-traded products, launching Australia's first gold ETF seven years ago and following it up with a gold ETF in England. Now Tuckwell's privately-held ETF Securities in London is hoping to replicate its success in the United States. He's up against quite a few heavy hitters, but he's made a good start. Of the company's roughly $20 billion in assets under management, about $1.5 billion corresponds to products sold in America.
Tuckwell's firm offers commodity-based ETFs that are backed by the real thing. Last year the company opened a Wall Street office and, in the months that followed, launched four physically-backed precious metal ETFs: gold, silver, platinum and palladium. The market is hugely competitive. The ETF Securities' ETFS Physical Swiss Gold Shares did well to collect $607 million since September, says investment analyst and Registered Rep. columnist Brad Zigler, but it pales compared to the SPDR Gold Shares, with $54.8 billion in assets.
Will Rhind, the company's strategic director in the United States, says investors are attracted to the fact that their ETFs are backed by physical assets, since these ETFs tend to trade more closely around the spot price of the underlying commodity. A number of commodity ETFs have gotten hammered in the past year because they're based on futures contracts, whose pricing is more volatile. There are storage costs for physically backed commodity ETFs — ETF Securities says it uses bank vaults in Zurich and London — but there's no counterparty risk, Rhind says. He concedes that ETF players like BlackRock, State Street and Vanguard have far bigger market shares, but those companies are legacy equity index managers; “We have an advantage by being a commodities house.”
Morningstar ETF analyst Paul Justice says ETF Securities needs to overcome its lack of brand recognition in the United States. “It could be a tough slog for them,” he says. “I question how much room everybody has for metals in their portfolio.” Tuckwell is taking aim at that; this year he applied to the SEC to launch 22 other ETFs, most of which would take long or short positions on a broader range of commodities.