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IndexIQ Adam Patti

IndexIQ launches first global Oil Small Cap ETF (IOIL)


IndexIQ is introducing the IQ Global Oil Small Cap ETF (NYSE Arca: IOIL), the first global small-cap exchange-traded fund (ETF), designed to provide pure play exposure to companies that are primarily engaged in the oil industry. This includes firms involved in exploration and production (E&P); refining and marketing; and equipment, services and drilling.

IOIL seeks to track, before fees and expenses, the performance of the IQ Global Oil Small Cap Index (Bloomberg Index Ticker IQSMOIL).

The price of oil has risen 23 pe rcent this year and gasoline has climbed to a 33-month high, spurred by a number of factors including the still unfolding unrest that has swept across the Middle East. This dramatic price appreciation has driven the price of crude oil over USD100 a barrel, which is having a significant impact on industries and consumers who are trying to keep pace with rising prices at the pump.

“Rising oil prices have wide-ranging repercussions, but it also offers opportunities for investors. Investors interested in oil company exposure historically have been limited in their choices to funds that contain exposure to both the oil and natural gas industries, or to commodities that offer very different return profiles,” says Adam Patti, chief executive officer with IndexIQ. “That approach is fine if one is looking for a way to add broad energy exposure, but not if a specific, concentrated oil industry play is what’s being called for.

“IOIL is focused on the global oil sector because non-US companies increasingly control the industry, drive the majority of the industry revenue, and control the vast majority of proven reserves. US-based oil companies increasingly are at a disadvantage when competing against foreign entities in closed economies. Additionally, we believe the small-cap segment of this and many markets holds the greatest potential for investors since these companies typically are better positioned for growth than their large cap competitors.”

The IQ Global Oil Small Cap Index is float-adjusted and market capitalization-weighted. To be included in the index, companies must have a minimum average market capitalization of USD150 million for the prior 90-day period. Stocks are required to have a minimum average daily trading volume of at least USD1 million for the prior 90 days, and a minimum monthly volume of 250,000 shares for the prior six months. The Index’s components and their respective weights are rebalanced quarterly.

As of April 11, 2011, the index had sector allocations in refining & marketing (40.46 percent), exploration & production (36.90 percent) and equipment & services (22.64 per cent); while the top three countries were the United States (45.08 per cent), Canada (11.67 per cent) and Thailand (7.46 per cent).

The launch of IOIL comes approximately one month after IndexIQ launched the IQ Global Agribusiness Small Cap ETF (NYSE Arca: CROP), another first of its kind fund that provides exposure to the fast-growing agribusiness sector.

“Our two most recent launches, IOIL and CROP, reflect our continued belief that investors can find significant opportunities in the demand that currently is permeating the commodities space,” says Patti. “And we strongly believe that small capitalization companies offer the most effective avenue for translating that demand into significant growth. We have been very pleased with the marketplace’s reaction to CROP and we’re excited to be following that launch with IOIL.”

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