Rydex Investments has received a private letter ruling from the Internal Revenue Service allowing the firm to use commodities-linked structured notes in place of swaps in its Commodities Fund, the Rockville, Maryland-based firm announced Tuesday.

In a ruling issued in December 2005, the IRS said certain income from commodity-linked swaps will not be deemed qualifying income after June 30, 2006.

The solution, Rydex said, was to shift to commodities-linked structured notes, which provide mutual funds a with tax-appropriate vehicle to gain exposure to a commodities index.

Because of the change, the firm will no longer be able to offer unlimited trading on the fund. The fund will waive 35 bps of its management fees up to June 30, 2007, capping the fund's total expenses at 1.20 percent.

"Commodities have been a popular asset class in recent years, as investors seek to diversify their portfolios," said Jim King, director of portfolio management at Rydex, in a statement. "We're pleased to be able to continue to offer investors a convenient and cost-effective way to access this asset class." 

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