Sprott reorganizes gold miner ETFs; lowers fees

Jul 22nd, 2019 | By | Category: Commodities

Toronto-headquartered precious-metals specialist Sprott Asset Management has assumed greater control of its two gold miner ETFs, replacing ALPS Advisers as the investment manager and absorbing the funds into the Sprott ETF Trust.

Sprott reorganizes gold miner ETFs; lowers fees

The Sprott Gold Miner ETFs now come with some of the lowest fees charged by ETFs in the same category.

As part of the process, the funds have adopted new underlying indices and had their expense ratios lowered.

The $180 million Sprott Gold Miners ETF (SGDM US) now tracks the Solactive Gold Miners Custom Factors Index, while the $70m Sprott Junior Gold Miners ETF (SGDJ US) tracks the Solactive Junior Gold Miners Custom Factors Index.

The funds previously tracked the Sprott Zacks Gold Miners Index and Sprott Zacks Junior Gold Miners Index respectively.

Both funds now come with expense ratios of 0.50%, down from 0.57%.

According to Sprott, the new expense ratios will remain in place for a period of at least two years. The ETFs will maintain their names and ticker codes and will continue to be listed on NYSE Arca.

The lower price tag places the funds at the less-expensive end of a field of seven gold miner ETFs listed in the US.

They are now cheaper than the $11.3 billion VanEck Vectors Gold Miners ETF (GDX US) and the $4.5bn VanEck Vectors Junior Gold Miners ETF (GDXJ US) which are the largest ETFs covering the sector and come with expense ratios of 0.53% and 0.54% respectively.

The only fund providing lower-cost access to gold mining stocks is the iShares MSCI Global Gold Miners ETF (RING US) which charges 0.39%. It has $260m in AUM.

John Ciampaglia, CEO of Sprott Asset Management, commented, “We are pleased with the overwhelming investor support for this reorganization. As a result, the Sprott Gold Miners ETFs will offer investors some of the lowest fees in the category. In addition, investors will benefit from greater integration into the Sprott organization and support from our client service, sales and marketing teams.”

The lower fees come at a time of renewed investor interest in gold and gold mining stocks. The price of gold has risen significantly in 2019, benefitting from an increase in geopolitical tensions and a more dovish stance by major central banks, most notably the Federal Reserve. The SPDR Gold Shares (GLD US), the largest ETP to track the price of gold, is up 10.4% year-to-date (YTD), as of 18 July 2019.

As the price of gold has risen, gold mining stocks have soared – SGDM and SGDJ have climbed 39.0% and 40.6%, respectively, YTD.

Under the hood

The ETFs’ new underlying indices offer a smart beta approach to the gold mining space and aim to outperform similar market-cap-weighted offerings.

The Solactive Gold Miners Custom Factors Index covers larger-sized gold companies listed on Canadian and US exchanges. The index targets returns attributable to the quality factor by tilting towards those stocks with the highest revenue growth, free cash flow yield, and lowest long-term debt to equity.

The Solactive Junior Gold Miners Custom Factors Index, consisting of small-capitalization gold companies listed worldwide. The index emphasizes junior gold producers with the strongest revenue growth and price momentum.

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