New York-based Global X Funds, a provider of exchange traded funds (ETFs), has launched a new fund: the Global X Oil Equities ETF (NYSEArca: XOIL). The launch is the latest expansion in the ETF issuer’s global commodity funds suite and is aimed at giving investors a purer play in oil equities, respectively, by following the indexing methodology of the Solactive Indexes.
Recent unrest in the Middle East, particularly in Libya, has contributed to soaring oil prices. While many indexes have been developed to track the market price of oil – using oil futures or oil equities, for example – few have been able to accurately track the performance of oil. To address the issue, the Global X Oil Equities ETF was developed as a fund that only includes companies with the highest correlation to oil prices. By using this correlation criterion, the Oil Equities ETF provides exposure to pure-play oil companies with significant oil reserves that are not as involved in other industries such as natural gas or downstream operations.
“We are offering a product for investors looking for exposure to oil while avoiding issues such as contango that reduce their returns,” said Bruno del Ama, CEO of Global X Funds.
The Global X Oil Equities ETF tracks the Solactive Global Oil Equities Index, which is designed to measure the performance of oil companies globally that are highly correlated with the spot price of oil. As of March 10, 2011, the three largest components of the index were Forest Oil Corp., Newfield Exploration Co., and Apache Corp.
Global X Funds has more than $1.5 billion in managed assets as of March 1, 2011, and is one of the fastest-growing ETF providers in the world with a focus on global commodities, developed, and emerging markets fund suites.