Amplify launches junior gold miners ETF with modified weighting approach

Dec 2nd, 2020 | By | Category: Commodities

Amplify ETFs has launched an ETF providing modified beta exposure to junior gold mining stocks globally.

Christian Magoon, CEO of Amplify ETFs.

Christian Magoon, CEO of Amplify ETFs.

The Amplify Pure Junior Gold Miners ETF (JGLD US) has listed on NYSE Arca and comes with an expense ratio of 0.49%.

The fund is linked to the EQM Pure Junior Gold Miners Index which, according to index provider EQM Indexes, has been designed to provide “improved pure-play access” to the small-cap gold mining segment by targeting metrics such as production levels rather than market cap.

The methodology identifies two categories of gold mining companies: gold producers and exploratory gold producers.

Gold producers are defined as firms that derive at least 75% of their revenue from the sale of gold or through gold royalty agreements. To focus on the junior segment of the market, only gold producers that mine less than 1 million troy ounces of gold per year, or receive royalties equivalent to under 1 million troy ounces of gold per year, are included.

Exploratory gold producers are defined as firms in pre-production that attribute at least 75% of their surveyed deposits to gold. According to EQM Indexes, by including exploratory companies, the index leverages the gold mining segment’s future operating potential, a feature that is typically not present in traditional gold mining indices.

Any gold producer or exploratory gold producer with a market capitalization below $100 million or an average daily trading volume less than $1m is not eligible for inclusion.

The weight of each category is set to equal the aggregate market capitalization of constituents within that group while capping the weight of the exploratory gold producer category at 15%. Within each category, stocks are equally weighted, subject to liquidity constraints, allowing the index to diversify its performance more broadly across all constituents.

The index is reconstituted and rebalanced semi-annually with buffer rules helping to limit unnecessary turnover.

As of 30 November, there are 60 stocks in the index which is primarily exposed to Canadian companies, accounting for 56.3% of the index weight, with a further 26.4% in Australian-domiciled firms. The remaining 17.3% is spread across eight countries.

Christian Magoon, CEO of Amplify ETFs, commented, “As investors increasingly allocate to gold in the current market environment, we believe the capital appreciation and diversification potential of small- and mid-cap gold and exploratory gold producers can’t be ignored. JGLD provides investors with cost-efficient and pure exposure to this market segment by implementing production and revenue tests that other gold stock ETFs might lack.”

The fund will compete against the $5.9 billion VanEck Vectors Junior Gold Miners ETF (GDXJ US), the world’s largest junior gold mining ETF. GDXJ comes with an expense ratio of 0.53% and tracks the MVIS Global Junior Gold Miners Index. The market-cap-weighted index includes firms globally that derive, or intend to derive, at least 50% of their revenue from the gold and silver mining industry.

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