VanEck launches two new ETFs in London

Oct 20th, 2017 | By | Category: ETF and Index News

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VanEck has launched two new ETFs on the London Stock Exchange (LSE), the VanEck Vectors Preferred US Equity UCITS ETF (LON: PRF) and the VanEck Vectors Natural Resources UCITS ETF (LON: HAP), offering access to US preferred stocks and global equities of firms involved in commodity production, respectively.

VanEck launches two new ETFs in London

VanEck launches two new ETFs in London

Philipp Schlegel, director of international business development at VanEck, commented: “These new funds listed today on the LSE add to the already varied and diverse range of products we offer to help investors meet their goals.

“PRF offers investors access to US preferred stocks which have higher income than ordinary stocks and senior corporate bonds with an investment grade rating. HAP gives investors the opportunity to buy into a broad-based portfolio that tracks the biggest and best-known companies in the global commodities sector, such as Monsanto and ExxonMobil.”

PRF tracks the performance of the Wells Fargo Hybrid and Preferred Securities Aggregate Index. The index is composed of preferred stocks and hybrid securities of companies that are listed on US stock exchanges with an investment grade rating from either Moody’s or S&P. Securities must also meet certain liquidity and size restrictions, and the index has a single issuer cap of 5%.

Preferred shares fall between debt and common stock in the seniority of a firm’s capital structure. Although technically equities, they have many bond-like qualities.

They tend to pay a fixed or floating-rate dividend, making them sensitive to changes interest rates. Although dividends can be suspended by a company’s board without the risk of default, some preferred shares may be cumulative in that unpaid amounts are accrued until the dividend is reinstated.

Although they display similarities to both equity and fixed income, preferred shares have exhibited a low correlation with both these asset classes in the last five years, potentially making them an attractive option for investors looking to reduce overall portfolio volatility.

The index’s sector exposure is heavily weighted in favour of financials, which make up 75.0% of the total weight. The other sectors represented are utilities (12.7%), communications (7.4%), industrials (4.2%) and technology (0.6%). The index has returned 10.5% in the year to 30 September.

HAP tracks the VanEck Natural Resources Index, providing exposure to companies listed globally that are involved in the production and distribution of commodities and commodity-related products and services. It provides balanced exposure to agriculture, base and industrial metals, energy, forest products, and precious metals sectors, and was one of the first commodity indices to include alternatives, such as water and renewable energy.

The index features a significant tilt to equities from the US, which make up 50.1% of the weight. The next largest country weights are Canada (11.1%), the UK (6.7%) and Australia (3.5%). As one would expect, the sector exposure is heavily weighted towards materials (36.8%), energy (27.3%) and industrials (10.0%), although consumer staples also features strongly as the third-largest sector with 16.5% of the weight due to the exposure vertically integrated food companies have to agricultural commodities.

The largest individual components of the index are currently Monsanto (7.8%), Deere (6.0%), ExxonMobil (4.2%) and Archer-Daniels-Midland (3.6%). The index has returned 9.4% in the year to 30 September.

The two new ETFs use physical replication to track their indices. PRF is reconstituted monthly and has a total expense ratio (TER) of 0.41%. HAP is reconstituted quarterly and has a TER of 0.50%.

The ETFs are both listed in dollars using the above ticker symbols and in pounds sterling using the ticker symbols PFRG and HAGB.

The launches bring VanEck’s Europe-domiciled ETF offering up to six. The current star of the stable is the $118m VanEck Vectors Gold Miners UCITS ETF which launched in March 2015.

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