VanEck has launched a new thematic equity ETF in Europe targeting companies worldwide that are involved in the uranium mining or nuclear infrastructure industries.
Nuclear power plants heat water to produce steam which is used to spin large turbines that generate electricity.
The VanEck Uranium and Nuclear Technologies UCITS ETF has been listed on Deutsche Börse Xetra in euros (NUKL GY) with a listing on London Stock Exchange expected in the near future.
Uranium is the fuel most widely used by nuclear power plants as it has the unique feature of being able to self-sustain nuclear fission – the only known material to do so.
Although uranium is a relatively abundant metal, nuclear power plants typically require a certain quality of uranium, referred to as U-235, which is far more scarce.
Uranium prices struggled for much of the last decade after nosediving following the Fukushima disaster in March 2011 which drastically shifted global sentiment away from nuclear power.
Uranium’s fortunes have bounced back in recent years, however, driven by government pledges worldwide to reduce greenhouse gas emissions and limit climate change – nuclear power, which emits zero direct emissions during operations, is a vital part of the sustainable energy mix.
Nuclear energy ETFs allow investors to gain exposure to crucial enablers of the low-carbon economy while also supporting energy independence from volatile fossil fuels supply.
Investment approach
The ETF is linked to the MarketVector Global Uranium and Nuclear Energy Infrastructure Index which selects its constituents from a universe of developed market stocks with market capitalizations greater than $150 million and average daily trading volumes above $1m.
The methodology screens for firms that derive at least 50% (25% for current components) of their revenues from the mining, exploration, development, and production of uranium.
The index also includes companies deriving at least 50% (25% for current components) of their revenues from the development and commercialization of nuclear fusion technology or molten salt nuclear reactor research; the construction, engineering, and maintenance of nuclear power facilities and nuclear reactors; and the provision of equipment, technology, and services to the nuclear power industry.
Constituents are weighted by float-adjusted market capitalization subject to a cap of 15% for the largest company, 10% for the second-largest company, and 8% for all other firms. If a current constituent sees its revenues from eligible activities drop below 50%, its weight will be capped at 5% going forward.
As of 8 February, the index contained 25 constituents with stocks listed in Canada (30.0%), Japan (27.2%), and the US (26.8%) accounting for the largest country exposures, followed by South Korea (10.3%).
Industrials and energy stocks dominated the index’s sector allocation with weights of 48.6% and 42.5%, respectively.
Notable positions included Cameco (17.4%), Uranium Energy (8.3%), Babcock & Wilcox (7.3%), Kepco Engineering & Construction (5.7%), and Toshiba (4.8%).
The ETF comes with an expense ratio of 0.55%. Income is accumulated within the portfolio.
The fund will compete with two existing uranium-focused ETFs including the $40m Global X Uranium UCITS ETF (URNU), which has an expense ratio of 0.65%, and the $50m Sprott Uranium Miners UCITS ETF (URNM), which is priced at 0.85%.