Unlike investing in generic ETFs that cover assets such as, and niche exchange-traded products, they target specific areas of the market that may seem unclear to most retail investors.
Some exchange-traded niche products may focus on companies that work with and use natural resources, while others use it. Another group may be,,,, or small farms.
Understanding the specific investment style of a niche fund is crucial before raising new capital as returns are likely to be higher as the focus is on smaller markets or narrower asset classes.
Those with a business focus are more affected by the general direction of the stock market, while ETFs holding derivatives are more affected by price movements around contract maturity dates and the gearing that derivatives can provide. In the case of agricultural products, crop yields can also be spotty, with risks such as drought or harsh winters.
As the appeal of ETFs grows, several of these niche products now have more than $ 1 billion in assets. Still, many are relatively new and continue to expand their asset base.
With all that information, let's look at two funds:
1. VanEck Vectors Agribusiness ETF
Current price: $ 67.73
52 Week Range: $ 42.52 – $ 69.43
Dividend Yield: 1.34%
Frequency of dividend payments: annual
Expense Ratio: 0.56% per year, or $ 56 with an investment of $ 10,000
The VanEck Vectors Agribusiness ETF (NYSE 🙂 provides exposure to a wide variety of companies engaged in agrochemicals, animal health, fertilizers, seeds, agricultural machinery, aquaculture, livestock, agricultural trade and plantations – such as grain, oil palms, sugar cane, tobacco leaves and vines.
MOO tracks the MVIS Global Agribusiness index and includes 52 stocks. The top ten holdings make up more than 55% of the fund's total net assets – just over 600 million. The five largest holdings are Zoetis (NYSE :), Idexx Laboratories (NASDAQ :), Deere (NYSE :), Bayer (OTC 🙂 and Nutrien (NYSE :).
In terms of country weighting, the US tops the list with more than 55%, followed by Germany, Norway, Japan, China and Canada. The most important sectors (by weighting) are consumer staples (30.0%), healthcare (26.4%), materials (21.9%) and industry (17.7%).
So far in the year, MOO has fallen by about 1.5%, but since the lows in March, the fund is up more than 60%. In fact, it hit a record high of $ 69.43 on September 2. Given recent volatility and pricing in broader markets, a further decline to the USD 62.5 or even USD 60 level is possible, which would provide long-term investors with a greater margin of safety.
Many analysts agree that MOO's screenings in 2019 and 2020 were both impressive, despite the great risks. MOO managed to gain 20.75% in 2019, even as trade tensions between the US and China increased and key agricultural regions experienced adverse weather conditions. 2020 was marked by the coronavirus pandemic and has seen supply chain and production disruptions as a result of several lockdown measures taken worldwide. Nevertheless, the fund has thrived since the lows in March and agricultural products have proven their worth.
2. VanEck Vectors Rare Earth / Strategic Metals ETF
Current price: $ 40.99
52 week range: 23.91-44.41
Dividend Yield: 1.59%
Frequency of dividend payments: annual
Expense Ratio: 0.46% per year, or $ 46 with an investment of $ 10,000
The VanEck Vectors Rare Earth / Strategic Metals ETF (NYSE 🙂 provides exposure to companies involved in the production, refining, and recycling of rare earths and strategic metals and minerals.
REMX, which has 21 interests, tracks the index. In terms of country allocation, China leads the list with more than 50%, followed by Australia (28.17%) and the US (7.12%).
The fund's net worth is nearly $ 200 million, with the top ten holdings accounting for more than 65% of that figure. Big names include Zhejiang Huayou Cobalt (SS :), China Molybdenum (SS :), and China Northern Rare Earth Group High-Tech (SS :).
"Rare earth elements are an essential part of many high-tech devices," said the American Geosciences Institute. The United States Geological Survey also supports the statement that there is an increasing demand for these metals with the release of 35 mineral resources and their critical functions for the US:
"- used in nearly all sectors of the economy; the platinum group metals – used for catalysts; rare earths – used in batteries and electronics; – used as protective coatings and alloys for; and titanium – used predominantly as a white pigment or as a metal alloy. "
While there may be different classifications for rare and / or strategic metals, the management of the fund highlights that nearly 50 elements in the periodic table are considered rare earths / strategic metals.
It is likely that the importance of this niche sector will increase in the coming years. So far in 2020, the fund is up nearly 2%. But it is up more than 70% since early spring. Long-term investors may want to consider exploring REMX, considering $ 37.50 as an entry option.
