Recently the iShares Silver Trust was launched. It is now the world’s largest silver-backed investment product, with over 330 million ounces (Moz) of silver held in the Trust and net assets of over US$5.5 billion. The Trust provides exposure to the day-to-day movement of the price of silver bullion and uses the LBMA Silver Price as its benchmark. It trades on the NYSE Arca, under the ticker symbol “SLV,” and is administered by BlackRock.
Silver exchange traded products (ETPs) came on the scene shortly after the early gold funds, the largest and most widely-followed of which is the SPDR Gold Shares (GLD) exchange traded fund, launched in November 2004.These funds were developed in order to expand the investment constituency in silver and gold, making it convenient for investors to acquire silver without the need of taking physical delivery and avoiding storage, insurance or assaying costs, as the metal is securely held in vaults by a recognized custodian.
A great deal of background research demonstrated that there was a significant potential for physical investment in precious metals from investors who had not yet entered the market even though they desired exposure to the metals. Some were private investors and some institutional investors, who found the prospect of dealing in the physical bullion market to be cumbersome and confusing, while some professionally run funds’ charters prevented them from holding “commodities.”
The major precious metal-backed ETPs are securities, which trade on stock exchanges and are backed by physical (allocated) metal, making it easier to invest with confidence. Interestingly, the majority of gold ETP holders are institutional investors, whereas the silver funds, especially those based in North America, have a higher proportion of retail investors. This is one reason why silver ETPs are more resilient than those of gold; silver investors often have firmer hands than those in the gold market.
As of today, iShares Silver Trust accounts for 94 percent of silver holdings in ETPs held by U.S. investors and 52 percent of holdings in ETPs held globally. The SLV is unrivalled in scale compared to other physically-backed silver ETPs, with the second largest ETP, the Central Fund of Canada, accounting for 12 percent of global holdings. From the end of 2006 through year-end 2015, the SLV’s holdings increased at a compounded annual rate of 11 percent and accounted for 43 percent of the 460.1 Moz increase in global ETP holdings during that period.
Other leading ETP’s include the Central Fund of Canada, the ZKB Silver ETF, ETF Securities, and the Sprott Physical Silver Trust, all backed by physical silver.