Van Eck Global, the asset management firm behind the Market Vectors brand of exchange-traded funds, earlier this month cross-listed two of the most successful US-based gold mining ETFs on the SIX Swiss Exchange: the Market Vectors Gold Miners UCITS ETF (GDX) and the Market Vectors Junior Gold Miners UCITS ETF (GDXJ). The ETFs track the NYSE Arca Gold Miners Index and the Market Vectors Global Junior Gold Miners Index respectively, which are market-cap weighted and cover a range of gold mining firms with a large global operational reach.
Lars Hamich, CEO of Van Eck Global
The funds have enjoyed unprecedented success in the US since inception, becoming the largest gold-mining ETFs globally (AUM collectively exceed $7.7bn). Strong interest in the US from foreign investors prompted a listing on the London Stock Exchange in April of this year. That listing enjoyed similar success, initiating another cross-listing on the Deutsche Börse, as well as setting the wheels in motion for the Swiss listing.
“Over 30 percent of the $8bn invested in our US-listed gold mining funds comes from non-US clients. This strong international client demand for UCITS ETFs and providing investors with flexible product options was the key motivation for our recent fund launches on the London Stock Exchange,” said Lars Hamich, CEO of Van Eck Global.
The funds, denominated in US dollars, will be traded in Swiss francs and invest in international securities and American depository receipts (ADRs). They have partial exposure to firms that maintain part of their operations in the mining and production of silver, which adds further diversification to each fund but also weakens the link to gold. The cumulative proportion of operations in this capacity will not exceed 20% of the total value of the portfolio.
Investments in gold have historically been a good hedge against inflation and these ETFs allow a cost-effective method of incorporating this benefit into a portfolio. By tracking the performance of liquid gold-mining equity stocks the fund gains exposure to gold prices but avoids the hassle and storage costs of investing directly in the underlying asset. The investor should be aware that these stocks act as proxies to the gold price and performance may diverge from that of gold commodities.
GDX currently holds 39 securities. The top five holdings are Goldcorp (6.92%), Barrick Gold (6.64%), Newmont Mining (6.03%), Agnico-Eagle Mines (5.24%) and Newcrest Mining (5.21%). The country exposure weightings of the fund is geared towards Canada (54.6%), followed by the US (13.5%) and South Africa (10%). This fund is comprised of medium to large cap enterprises. The fund has an expense ratio of 0.53%.
GDXJ currently holds 66 securities. The top five holdings are Osisko Gold Royalties (5.89%), Hecla Mining (4.31%), Centamin Egypt (4.23%), Northern Star Resources (4.2%) and Novagold Resources (3.56%). The country exposure weightings are also favoring Canada (61.1%), Australia (15.1%), and the US (10.1%). GDXJ tracks the performance of micro, small and mid-cap firms and is thus more suited to investors with a larger risk appetite. The majority of the stocks in this fund are small-cap (90.7%), with a market capitalization between $200m and $1.5bn. The expense ratio is 0.55%.