Independent ETF company GraniteShares recently launched a new “low-cost” platinum ETF. Called the GraniteShares Platinum Trust (ARCA:PLTM), it will be backed by physical platinum held in a vault in London.
Company founder and CEO Will Rhind connected with the Investing News Network (INN) via phone to discuss this new platinum investment product.
Rhind, a veteran in the ETF space, began his career over 15 years ago as a founding member of iShares, and went on to work at ETF Securities. He also served as CEO of the World Gold Council, where he ran SPDR Gold Shares (ARCA:GLD), the largest physically backed gold ETF in the world. Here’s what he had to say about the GraniteShares Platinum Trust and the future of the platinum market.
INN: I want to ask about timing. Why launch a platinum ETF right now?
WR: GraniteShares itself is a relatively new initiative. As a company, we launched our first funds in the middle of last year — what we were initially trying to do was establish a low-cost commodities ETF business [to simplify] the way investors get access to commodities.
Platinum is just an extension of that — we brought BAR, which is the lowest-cost gold ETF, into the market at the end of August. We believe that platinum is a good story. The demand for platinum is growing and the market has sound fundamentals.
INN: How has the reception been so far?
WR: The reception has been really good. I was at an ETF conference down in Florida, so we actually launched it last Monday (January 22), which was the first day of the conference. The major challenge, the major pain point that GraniteShares is solving for investors, is that the commodities space is not really a sector that’s been done very well historically. Typically there have been high-management-fee products that have been suboptimally structured for investors. Hopefully our message of providing low-cost, better-structured access to commodities and simplifying the process is something that resonates a lot with people. That’s why we’re getting a lot of positive feedback.
INN: Can you go into what you mean when you say “low cost” and how that works?
WR: We have the lowest-cost commodities ETFs in the market. Previously, there were exchange-traded notes that were issued by banks, and they had high management fees associated with them. Typically around 80, 90, 100 basis points.
What no one had done is brought a more innovative structure, but with lower price points. Similar to what you would find in equivalent products in the equity and fixed-income sectors. That’s what we are trying to do. I think the investment case for platinum has just not been made. The market for gold ETFs in the US is about $50 billion in size, and the market for platinum-based ETFs is around $500 million. It just seems disproportionately low when the metal has very similar attributes and platinum is 30 times rarer than gold. It strikes us that the reason for that is that nobody has made the case to investment advisors and professional investors as to why you should own platinum and what the benefit is to investing in this particular asset class.
INN: Can you talk about your agreement with the World Platinum Investment Council (WPIC)?
WR: We have partnered with the WPIC, which is the world authority on the platinum market. Its mandate is to improve the investment value chain for platinum investors around the world. We and the WPIC feel that demand for platinum is growing, particularly in the US, but that the market needs a new, low-cost access vehicle to make it easier for investors to access platinum. Making the platinum investment case is something that is very important to us, and something that we feel has been lacking so far.
INN: Do you have any insights on the future of the platinum market?
WR: Many investors look at platinum as a long-term investment, and at the end of last year holdings in platinum ETFs were growing despite a fall in the platinum price. Since the last rate hike in December, the platinum price has shot up, along with other commodities. The market is anticipating higher demand, and that was largely on the back of a proposed merger with two major South African platinum miners. There was a plan to rationalize production that would be price positive, all things being equal for platinum. That was probably one of the major contributing factors to the short run up in the price.
I think longer-term the fundamentals for platinum are good, and they appeal to investors that like gold. They’re looking for something that has more scarcity, but has more industrial applications. The jewelry market for platinum is growing, which is something that palladium lacks. Palladium is primarily used in autocatalysts, whereas platinum has a broader array of uses.
If you look at most major asset classes, you’ll see that they’re trading at or near all-time highs — if you look at property, the stock market, the bond market, multiple other asset classes. If you look at commodities, that’s not the case. For example, take the S&P 500 (INDEXSP:.INX) and divide by the major commodities indices, and you get a ratio now that is the lowest in almost 50 years.
Platinum is significantly below its all-time high of $2,200 per ounce; today it is at about $1,000, which is less than half of the previous all-time high. If you think that the price of platinum can get back at some point to its all-time high, then the level that we’re trading at today is still quite far below that. I think that’s something that a lot of commentators have pointed out when they look at not just platinum, but at other major commodities such as gold, which is trading quite a bit off its all-time high.
INN: I’ve heard predictions that there might be a stock market correction this year, so there’s probably merit to what you’re saying [is happening] with the commodities.
WR: I think it’s now the second year we’ve had back-to-back positive returns for commodities. This is a classic late-cycle behavior, a late-cycle signal where you start to get a rally in commodities prices. No one can predict the future, and I’m not saying that means a stock market correction this year per se, but when you start to see commodities prices rising, it is typically a late-cycle indicator that the stock market rally will come to an end at some point.
INN: Do you have plans to launch any further ETFs backed by various commodities?
WR: We’re just at the early stage of our life as a company, and we have five funds in the market today. We’ll launch a comprehensive range of funds this year, and hopefully almost every year while we’re in existence, because at the end of the day our job is to provide the best ideas and the best access to investors that we can.
GraniteShares’ other commodities-focused ETFs are: the GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF (ARCA:COMB), the GraniteShares S&P GSCI Commodity Broad Strategy No K-1 ETF (ARCA:COMG), the GraniteShares Gold Trust (ARCA:BAR) and the HIPS US High Income ETF (ARCA:HIPS).
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.