Element Funds, a new investment firm focused on opportunities within the renewable economy, has made its ETF debut.
The ETF provides exposure to commodities that are essential to the production of electric vehicles, battery energy storage systems, and other renewable infrastructure.
The Element EV, Solar & Battery Materials Futures Strategy ETF (CHRG US) has been listed on NYSE Arca with an expense ratio of 0.95%.
The actively managed fund leverages the experience of John Raymond and John Calvert, principals at the natural resources-focused private equity firm, The Energy & Minerals Group, to provide exposure to the core commodities essential to the production of electric vehicles, battery energy storage systems, and other renewable infrastructure.
Element notes that an estimated $1.2 trillion is expected to be spent through 2030 on developing and producing electric vehicles alone, from mining and refining the raw materials to manufacturing the specialized batteries.
To address the lopsided supply-demand balance of this massive energy expansion, the global economy is projected to require more than 200 new mines and plants over the next decade to supply the necessary raw materials.
CHRG aims to provide investors of all classes with institutional-quality exposure to the futures contracts of commodities that are considered key to the shift to a net-zero carbon renewable economy.
At launch, CHRG consists of futures linked to the performance of lithium, nickel, copper, and cobalt with weightings set to approximate industry demand for these metals. According to Element, the ETF’s active management allows the fund to add new metals and adjust commodity weights in the future to reflect the ever-evolving nature of technology in the renewable economy.
Will McDonough, CEO of Element Funds, said: “Over the past several years, we’ve seen enormous investor demand in strategies linked to the electric vehicle and renewables revolution. However, critical metals are not an investment that you can set and forget. We will utilize our global experience to continuously monitor and re-evaluate CHRG’s portfolio allocations and weighting based on real-time industry developments.”
John Raymond added: “In the decades of experience that we have accumulated managing private market strategies in this space, we have become acutely aware of the necessity of an active approach to investing in the raw materials at the foundation of the renewable energy economy. Our experience confirms that accessing these specific metals requires deep knowledge in the exploration, mining, processing, and end-use application lifecycle, and we’re excited to bring investors a means of accessing this market.”
Thematic commodity ETFs offer a relatively new approach for 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.
Last year saw the introduction of three such 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%.