The relatively newly created Market Vectors-RVE Hard Assets Producers (HAP) is an exchange traded fund (ETF) which tracks the price and yield performance of the Rogers-Van Eck Hard Assets Producers Index (RVEI) has raised questions about what hard assets are all about.

It is actually quite simple: hard assets are natural resources and commodities that are mined or harvested and play a pivotal role in the production of goods and services, as well as investments with intrinsic value.

Some good examples of hard assets include oil, natural gas, gold, farmland, cotton, and commercial real estate.  They constitute the building blocks of economic growth in that they account for 16% of world output, comprise the largest non-financial sector in the global economy, and play a significant role in total stock market capitalization, states CommodityOnline.

Hard assets are generally classified under six categories – energy, agriculture, base metals, precious metals, forest products, and water and renewable energy.  The RVEI, formed by Jim Rogers, comprehensively covers these six market areas and gives good exposure to the stocks of the major players engaged in the production and distribution of hard assets.

Van Eck Global states that hard assets are a great option to diversify portfolios, yield competitive returns, hedge against inflation, give exposure to key global economic sectors, and complements other alternative investments.

The sector breakdown in the index as of Sept. 30 is 42.6% energy; 29.2% agriculture; 12.2% industrial metals; 8.1% precious metals; 4% paper and forest products; and 3.9% alternatives.

HAP is down 13.4% in the last month, and was launched on Sept. 3.

Tags: Commodity ETFs, HAP, Sector ETFs