United States Commodity Funds (USCF) has launched a new actively managed thematic ETF that utilizes a mix of commodity and equity exposures to target the battery metals investment theme.
The ETF provides commodity and equity-based exposure targeting the battery metals investment theme.
The USCF Sustainable Battery Metals Strategy Fund (ZSB US) has been listed on NYSE Arca with an expense ratio of 0.59%.
The fund seeks a total return by investing primarily in metals derivatives instruments and, to a lesser extent, in the equities of companies that are economically tied to the metals that are necessary for “Electrification”.
USCF defines Electrification as the trend for energy derived from sustainable sources such as wind, solar, and hydroelectric power to gradually replace energy generated by fossil fuels.
The firm notes that the infrastructure needed to produce and store that energy as electricity in batteries will require substantial amounts of certain industrial, precious, and rare earth metals that are used in batteries, battery charging infrastructure, and sustainable energy generation and storage infrastructure. Eligible types of metals currently include cobalt, copper, iron ore, lithium, and nickel, among others, with additional metals likely to be added over time as Electrification technology evolves.
The equities in which the ETF may invest are companies located worldwide, including in emerging markets, which derive at least 50% of their revenue from the mining, processing, production, refining, recycling, and other related activities of such metals.
USCF will select and weight portfolio constituents using a proprietary multi-factor quantitative methodology that considers the use of a specific metal in battery and Electrification infrastructure, the other uses of such metal, and each metal’s environmental impact.
The ETF will also seek to achieve a “net-zero” carbon footprint by purchasing carbon offset investments in an amount equal to the estimated aggregate carbon emissions of the fund’s holdings.
Thematic commodity ETFs offer a relatively new approach to tapping into investment trends related to electric vehicles or other aspects of the renewable economy. Compared to equities-based strategies, commodity ETFs are not beholden to stock price fluctuations due to factors unrelated to the demand for the underlying metals, and investors will not be hampered by company-specific factors such as political, permitting, construction, operations, balance sheet, and management risks.
Earlier this month, Element Funds made its ETF debut by listing the actively managed Element EV, Solar & Battery Materials Futures Strategy ETF (CHRG US) which has an expense ratio of 0.95%.
Last year also saw the introduction of three other thematic commodity ETFs in the US, each of which is passively managed. The Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT US) launched in April and comes with an expense ratio of 0.59%; the Harbor Energy Transition Strategy ETF (RENW US) listed in July and has an expense ratio of 0.80%; and the KraneShares Electrification Metals ETF (KMET US) came to market in October costing 0.79%.