Friday, October 29, 2010
The WSJ Unearths a 'Rare' New ETF
News summary by MFWire's editors
Fundsters interested in ETFs focused on the commodities sector may want to check out Van Eck
's [see profile
] newest offering. This week the New York-based mutual fund firm unveiled the Market Vectors Rare Earth/Strategic Metals ETF
, which invests in companies that produce, refine and recycle so-called rare earth and strategic metals (which include cerium, manganese, neodymium, titanium and tungsten).
The Wall Street Journal
's Matt Whittaker reports
on the launch, noting that it came just as China reportedly restarted shipping rare-earth and strategic metals to the US after a big cut in July.
The new ETF has a net expense ratio of 57 basis points. Hao-Hung (Peter) Liao
and George Cao
PM the ETF. Van Eck handles administration and distribution of the ETF, while BNY Mellon
Company Press Release
NEW YORK, Oct 28, 2010 -- Van Eck Global has launched Market Vectors Rare Earth/Strategic Metals ETF (nyse arca:REMX), the first U.S.-listed exchange traded fund (ETF) which seeks to give investors pure play exposure to the equities of companies primarily engaged in the producing, refining, and recycling rare earth/strategic metals, it was announced today.
Rare earth/strategic metals are industrial metals that are typically mined as by-products in operations focused on precious metals and base metals. Compared to base metals, they have more specialized uses and are often more difficult to extract. Currently, approximately 49 elements in the periodic table are considered rare earth/strategic metals. They include such elements as cerium, manganese, titanium and tungsten. Strategic metals are used in a variety of technologies including jet engines, hybrid cars, steel alloys, wind turbines, flat screen televisions and cellular phones. Rare earth metals, a subset of strategic metals, are a collection of 17 chemical elements that are essential in many of today's most advanced technologies, with particular applications in electronics.
REMX seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Rare Earth/Strategic Metals Index (ticker MVREMXTR), a rules-based, modified-capitalization weighted, float adjusted index intended to give investors a means of tracking the overall performance of publicly traded companies primarily engaged in the producing, refining, and recycling of rare earth/strategic metals. To be included in the index, a company must have the capacity to generate more than 50 percent of its revenue from rare earth/strategic metals-focused efforts.
As of October 13, 2010, the Index included 24 constituents from eight different countries. Australia had the largest country weighting, at 23.9 percent, followed by Canada, at 19.81 percent, and the United States and China, with 18.77 percent and 14.84 percent, respectively. While China controls the vast majority of all rare earths production, the Index is limited to equities that are currently available to foreign investors; therefore only offshore China equities, or H-Shares, are included in the investable universe.
Van Eck points out that investing in the rare earth/strategic metals industry is not without risks, including geopolitical and environmental concerns. Further, many of the pure play rare earth/strategic metals companies are small- to medium-sized firms and are particularly sensitive to the availability of capital. Company share prices, as well as the prices for the metals themselves, can be volatile. Shares of some small rare earth mining companies, in particular, have seen a recent surge in price as fears of China's export cuts have driven up prices of the commodities. The potential effect that Chinese policies have on the industry is a risk that should also be considered.
"We believe REMX offers investors balanced exposure to the sector first by including strategic metals as well as rare earths and second by including processors and recyclers, not just mining companies. An additional advantage is that the underlying index caps exposure to any company at 8%; this limit prevents any particular company from having an undue effect on the ETF," said Jan van Eck, Principal of Van Eck Global. REMX joins Van Eck's family of hard asset ETFs, which includes Market Vectors Agribusiness ETF (MOO), Market Vectors Coal ETF (KOL), Market Vectors Gold Miners ETF (GDX), Market Vectors Junior Gold Miners ETF (GDXJ), Market Vectors RVE Hard Assets Producers ETF (HAP), and more.
REMX carries a gross expense ratio of 0.63 percent and a net expense ratio of 0.57 percent. Expenses are capped contractually until May 1, 2012. Cap excludes certain expenses, such as interest.
About Van Eck Global
Founded in 1955, Van Eck Associates Corporation was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today the firm continues this 50+ year tradition by offering global investment choices in hard assets, emerging markets, precious metals including gold, and other specialized asset classes.
Market Vectors exchange-traded products have been offered by Van Eck Global since 2006 when the firm launched the nation's first gold mining ETF. Today, Market Vectors ETFs and ETNs span several asset classes, including equities, municipal bonds and currency markets.
Van Eck Global also offers mutual funds, insurance trust funds, separate accounts and alternative investments. Designed for investors seeking innovative choices for portfolio diversification, Van Eck Global's investment products are often categorized in asset classes having returns with low correlations to those of more traditional U.S. equity and fixed income investments.
The Market Vectors Rare Earth/Strategic Metals Index (the "Index") is the exclusive property of 4asset-management GmbH, which has contracted with Structured Solutions AG to maintain and calculate the Index. Structured Solutions AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards 4asset-management GmbH, Structured Solutions AG has no obligation to point out errors in the Index to third parties.
The Market Vectors Rare Earth/Strategic Metals ETF is not sponsored, endorsed, sold or promoted by 4asset-management GmbH and 4asset-management GmbH makes no representation regarding the advisability of investing in the Fund.
Investments in companies involved in the various activities related to the mining, refining and manufacturing of rare earth/strategic metals are subject to elevated risks including international political and economic developments, adverse governmental or environmental regulations, and commodity prices. Moreover, some companies may be subject to the risks generally associated with extraction of natural resources, such as the risks and hazards associated with metals and mining, such as fire, drought, and increased regulatory and environmental costs. In addition, companies involved in the various activities that are related to the mining, refining and manufacturing of minor metals may be at risk for environmental damage claims. In particular, small and mid-cap mining companies may be subject to additional risks including inability to commence production and generate material revenues, significant expenditures and inability to secure financing, which may cause such companies to operate at a loss, greater volatility, lower trading volume and less liquidity than larger companies. Investors should be willing to accept a high degree of volatility and the potential of significant loss. China is currently the primary source of rare earth/strategic metals; a ban on the export of rare earth metals, or alternatively a reversal of China's policies on export limits, could have a significant impact on industries around the globe. Radioactive materials are sometimes associated with rare earth mining projects and may cause difficulties in obtaining necessary permits.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. To obtain a prospectus, which contains this and other information, call 1.888.MKT.VCTR or visit vaneck.com. Please read the prospectus carefully before investing.
SOURCE: Van Eck Global
Neil Anderson, Managing Editor
Stay ahead of the news ... Sign up for our email alerts now
Do You Recommend This Story?