OILK: ProShares Launches Only U.S. Crude Oil ETF With No K-1

ProShares, begun trading a new ETF, the ProShares K-1 Free Crude Oil Strategy ETF (Bats: OILK) on Wednesday, Septemebr 28, 2016. Here is a synopsis of the new ETF:

 

FUND INFORMATION:

Symbol: OILK Exchange: BATS
Name: ProShares K-1 Free Crude Oil Strategy ETF   Net Expense Ratio: 0.65%

 

FUND OBJECTIVE:
The ProShares K-1 Free Crude Oil Strategy ETF seeks to provide total return through actively managed exposure to the West Texas Intermediate (WTI) crude oil futures markets. The Fund’s strategy seeks to outperform certain index based strategies by actively managing the rolling of WTI crude oil futures contracts.
“Rolling” means selling a futures contract as it nears its expiration date and replacing it with a new futures contract that has a later expiration date. The Fund generally selects between WTI crude oil futures contracts with the 3 nearest expiration dates (known as the front, second and third  month  contracts)  based  on  ProShare  Advisors LLC’s analysis of the liquidity and cost of establishing and maintaining such positions.

Futures contracts with a longer term to expiration may be priced higher than futures contracts with a shorter term to expiration, a relationship called “contango”. When rolling futures contracts that are in contango, the Fund may sell the expiring contract at a lower price and buy a longer-dated contract at a higher price, resulting in a negative roll yield. During contango environments, the Fund’s active investment strategy attempts to select among the front, second, and third month WTI Crude Oil contracts in a manner  that  mitigates  negative  roll  yield  and  potentially increases Fund returns compared with index-based strategies
that use formulaic rolling strategies.
Conversely, futures contracts with a longer term to expiration may be priced lower than futures contracts with a shorter term to expiration, a relationship called “backwardation”. When rolling futures contracts that are in backwardation, the Fund may sell the expiring contract at a higher price and buy a longer-dated contract at a lower price, resulting in a positive roll yield. During backwardation  environments,  the  Fund’s  active  strategy attempts to select among the front, second, and third month WTI contracts in a manner that maximizes positive roll yield and potentially increases Fund returns.

The Fund generally will not invest directly in WTI crude oil futures. The Fund expects to gain exposure to these investments by investing a portion of its assets in the ProShares Cayman Crude Oil Strategy Portfolio, a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands (Subsidiary). The Subsidiary is advised by ProShare Advisors, the Fund’s investment advisor, and invests directly in WTI crude oil futures. Unlike the Fund, the Subsidiary is not an investment company registered under the Investment Company Act of 1940, as amended. Like other 1940 Act funds, OILK will provide shareholder tax reporting information on 1099 forms, not the K‑1 form issued by partnerships.

The Fund’s investment in the Subsidiary  is  intended  to  provide  the  Fund  with  exposure  to commodity markets in accordance with applicable rules and regulations. The Fund will invest up to 25% of its total assets in the Subsidiary. Except as otherwise noted, references to the Fund’s investment strategies and risks include the investment strategies and risks of the Subsidiary. The Fund employs various investment techniques that ProShare Advisors believes should, in the aggregate, meet the investment objective of the Fund. The instruments that the Fund will principally invest in are set forth below. Cash balances arising from the use of futures contracts will typically be held in short-term money market instruments.

 

ETF Holdings:
(CLZ6) WTI Crude Oil, 11/21/2016

 

 

Useful Links:
OILK Home Page


Category: Commodities> Energy> WTIC Oil

 

ETFtrack comment:
Here is a comment from Michael L. Sapir, co-founder and CEO of ProShares Advisors, LLC, the advisor to ProShares:
“Many investors want to invest in crude oil with the convenience of an ETF, but all other crude oil ETFs involve complicated tax reporting. OILK is the only U.S. ETF that lets investors get crude oil exposure but skip the K-1 tax form.”

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