VanEck launches global mining ETF on LSE

Apr 26th, 2018 | By | Category: Commodities

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VanEck Europe has launched the VanEck Vectors Global Mining UCITS ETF (GDIG LN) on the London Stock Exchange, providing access to firms around the world which are operating in the mining industry. The new offering complements the firm’s existing portfolio of ETFs which includes funds tracking the global gold mining sector.

VanEck global mining ETF

The fund provides exposure to metal and mining companies across both developed and emerging markets.

“In a diversified portfolio, commodity companies are a valuable component primarily due to their strong fundamentals and inflation-protecting qualities,” said Dominik Poiger, ETF portfolio management at VanEck.

The fund tracks the EMIX Global Mining Constrained Weights Index which is a rules-based, market cap-weighted index covering both developed and emerging markets.

Launched in February 1989 as the Euromoney Global Mining Constrained Weights Index, the industry-recognized benchmark for the global metal and mining industry has accrued nearly a 30 year track record.

The index is rebalanced quarterly and constrained such that no single constituent has a weight greater than 9%, and the sum of constituent weights greater than 4.5% does not exceed 36%.

There are currently 160 equities in the index which includes companies that are engaged in extracting gold, silver, copper, nickel, zinc, lead, aluminum, iron ore, thermal coal, metallurgical coal, cobalt, and lithium.

Companies listed in the UK lead the country weightings, representing just over a quarter (26.8%) of the total index. Firms listed in Canada and Australia also play a significant role with total index weights of 19.2% and 17.2% respectively. The US is the fourth largest country exposure at 9.9%.

The largest single constituents are Glencore (8.0%), Rio Tinto (6.7%), BHP Billiton (5.6%), Vale (4.6%) and Anglo American (4.4%).

Poiger argues the current market environment is beneficial for the metal and mining industry with global synchronous growth expected to continue to support demand, while the trend towards widespread adoption of electric vehicles has the potential to be a disruptive force underpinning demand for commodities.

He further notes that mining shares in particular have broken their downtrend by means of industry-wide restructuring measures. According to Poiger, the sector is now focusing increasingly on returns on capital, returning free cash flow to shareholders and improved profitability.

The fund has a total expense ratio (TER) of 0.50% and is tradeable in US dollars (GDIG) and pound sterling (GIGB LN).

Also within VanEck’s suite of ‘hard asset’ ETFs is the VanEck Vectors Gold Miners UCITS ETF (GDX LN) and the VanEck Vectors Junior Gold Miners UCITS ETF (GDXJ LN). GDX covers a comprehensive portfolio of large-, mid-, and small-capitalisation global gold mining companies and currently has $120m in assets under management and a TER of 0.53%.

GDXJ invests in micro-, small-, and medium-capitalisation mining companies, called “juniors” because they are in an exploratory or early mining phase. The fund has $76m in AUM and a TER of 0.55%.

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