Barclays Bank has introduced a new series called iPath. The iPath family will be notes (think debt) issued by Barclays Bank that track an index. The notes will be exchange traded like the iShare family of stock index Exchange Traded Funds. While you can buy and sell prior to maturity at market prices, at maturity you are dependant on Barclays' ability to pay the debt off. Given their financial strength and 300 year history, that shouldn't be too big of a risk.
The primary driver for the new family of securities seems to be taxes. While the IRS has not yet issued a ruling Barclays hopes these will be more tax efficient. Barclays' accountants and lawyers believe that these notes should be taxed as prepaid contracts and will not have taxable events until you sell or the notes mature. I recommend you consult your own tax advisor until the IRS issues a formal ruling.
The first two securities in the iPath family track commodity indexes. The first tracks the Goldman Sachs Commodity Index which is heavily energy weighted. The second tracks the Dow Jones-AIG Commodity Index which caps exposure to any commodity at 33% and so is more balanced. Barclays promises to pay the index performance minus a .75% fee. This is more expensive than ETFs, but cheaper than some of the large commodity funds.
Commodity funds have low correlation to the broad stock market so they generally provide good diversification benefits. They generally perform best in inflationary environments. Check out Barclays Bank PLC by clicking on their name. Check out the funds here.
Comment Preview