The sharp economic recovery from the depths of the pandemic coupled with continually evolving expectations in terms of future impact have recast the spotlight on natural resources and commodities. While this short-term attention after a prolonged period in the background is a welcome change in sentiment and acceptance, the long-term rationale for investing in natural resource equities and commodities has remained consistent over time. Notably, an allocation to natural resources and commodities can provide unique benefits to investors not only as a tool to help enhance portfolio diversification, but also as a means to gain direct access to global growth and as a hedge to offset the impact of inflation.
Historic fiscal and monetary policy has reignited demand for resources as the global economy reopened. Meanwhile, supply has been constrained from the sharp drop in capital investment over the last several years. In simplified terms, there is more money in the system, increased government and consumer spending, and rising prices through consumption. Plus, less supply of materials and other factors leads to higher input costs. Collectively, these trends establish a sturdy price floor and contribute to increasing evidence of a prolonged inflationary cycle.
Historically, natural resources and commodities broadly have acted as a viable hedge to inflation. This outperformance has also been particularly notable in corresponding periods of positive economic growth.
Resources, Commodities Can Thrive in Positive Growth, Inflation
Source: VanEck, CRSP, FactSet, Bloomberg. Data as of December 2020. See definitions and disclosures below. “Positive Inflation Surprise” determined by quarters where a year-over-year percent change in inflation (as measured by U.S. Consumer Price Index for All Urban Consumers – CPI-U) was higher than 1-year-ahead forecasts from Philadelphia Federal Reserve Bank’s Survey of Professional Forecasters (from January 1970 to December 1977) and University of Michigan’s inflation expectations survey (from January 1978 to December 2020). Global growth measured by periods where World Bank’s real global GDP growth (year-over-year % change) was greater than the prior year.
In addition to the benefits provided broadly by these asset classes, companies—particularly within energy, industrials metals and gold—have healthy balance sheets, attractive valuations and the ability to generate significant free cash.
EV/EBITDA of Global Sectors and Select Sub-sectors – 10 Year Range*
Source: VanEck, Bloomberg. Data as of July 2021.*EV/EBITDA = Enterprise Value / Earnings Before Interest, Taxes, Depreciation and Amortization. Energy, Materials, Utilities, Telecom, Healthcare, Consumer Staples, Consumer Discretionary, Industrials and Information Technology represented by respective sector-level indices of the MSCI World Index (note: Real Estate and Financials are excluded due to data availability). Diversified Mining represented by the FTSE Global Metals & Mining (ex. Gold) Index. U.S. E&Ps represented by the S&P 1500 Composite –Oil & Gas Exploration & Production Index. Ag Chems & Proteins represented by an average of Bloomberg’s Global Agricultural Chemicals and Global Meat Processing/Packaging Valuation Peer Indices.
Many companies also exhibit what we view as fascinating longer term growth profiles as direct inputs and beneficiaries of the investment output needed for the resource transition movement fueled by technological advances and new, increased applications of metals and minerals.
Minerals Used in Clean Energy Technologies
Source: IEA. Data as of May 2021.
VanEck Natural Resources and Commodities Solutions
VanEck has a history of investing in natural resources and commodities for over 50 years, offering investors actively and passively managed strategies, from physical commodities to natural resource equities. We offer specialized exposure to individual sectors and diversified solutions with broad exposure across sectors and industries.
|Traditional Energy||Alternative Energy||Base Metals||Agri-|
Rare Earth Metals
|Global Resources Fund||GHAAX||■||■||■||■||■||■|
|CM Commodity Index Fund||CMCAX||■||■||■||■|
|International Investors Gold Fund||INIVX||■|
|Oil Refiners ETF||CRAK||■|
|Energy Income ETF||EINC||■||■|
|Unconventional Oil & Gas ETF||FRAK||■|
|Gold Miners ETF||GDX||■|
|Junior Gold Miners ETF||GDXJ||■|
|Natural Resources ETF||HAP||■||■||■||■||■||■|
|Uranium+Nuclear Energy ETF||NLR||■||■|
|Oil Services ETF||OIH||■|
|VanEck Merk Gold Trust||OUNZ||■|
|Inflation Allocation ETF||RAAX||■||■||■||■||■||■||■||■|
|Rare Earth/Strategic Metals ETF||REMX||■|
|Low Carbon Energy ETF||SMOG||■|
More information including recent performance and current holdings can be found by clicking the fund names below:
Actively-managed approach to companies with unique competitive advantages associated with traditional commodities and those leading the development of emerging resource applications and technologies.
Proven fundamental, bottom-up process emphasizes stock selection based on industry experience to access opportunities across the gold mining sector.
A passively managed fund that offers diversified commodities exposure by spreading its exposure across multiple maturities and maintaining a constant maturity per commodity to mitigate the impact of negative roll yield.
Provides exposure to an industry that may generally benefit from lower oil prices, a segment that has historically interacted differently with oil prices and market dynamics than other energy segments.
Offers exposure to MLPs and energy infrastructure companies that have historically exhibited attractive yield characteristics without burdensome K-1 tax reporting.
The nation’s first ETF that offers direct exposure to the gold mining industry, which may provide leverage to rising gold prices.
Access to junior gold miners, including smaller exploratory or early development phase companies that are responsible for many gold reserve discoveries worldwide.
Offers exposure to global companies involved in six natural resources segments (including agriculture, energy, metals and renewable energy).
Positioned to meet growing demand as global population growth is driving increasing food demand and the need for efficient agricultural solutions.
Access to an important segment of the nuclear energy market, which is a significant clean energy source at an inflection point from increasing demand.
Invests in highly liquid companies in oil services industry, including both domestic and U.S. listed foreign companies allowing for enhanced industry representation.
Provides investors with a convenient and cost-efficient way to invest in gold through shares with the option to take physical delivery.
Comprehensive allocation strategy that invests across real assets and seeks to reduce volatility by responding to changing market environments.
Provides access to the rare earth or strategic metals industry, which supplies key inputs to many of the world’s most advanced technologies.
Access to the steel industry, an industry supporting global industrialization and economic expansion.
Exposure to low carbon energy that includes not only solar, wind and hydro companies, but also in more recently developing areas of the market such as electric vehicles, battery tech, hydrogen and fuel cells.
Originally published by VanEck on October 29, 2021.
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CM Commodity Index Fund is subject to the risks associated with its investments in credit, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, counterparty, debt securities, derivatives, index tracking and data, industry concentration, money market funds, management, market, operational, regulatory, repurchase and reverse repurchase agreements, subsidiary risks and U.S. government securities. The use of commodity-linked derivatives such as swaps, commodity-linked structured notes and futures entails substantial risks, including risk of loss of a significant portion of their principal value, lack of a secondary market, increased volatility, correlation, liquidity, interest-rate, valuation and tax risks. Gains and losses from speculative positions in derivatives may be much greater than the derivative’s cost. At any time, the risk of loss of any individual security held by the Fund could be significantly higher than 50% of the security’s value. Investment in commodity markets may not be suitable for all investors. The Fund’s investment in commodity-linked derivative instruments may subject the Fund to greater volatility than investment in traditional securities.
Global Resources Fund is subject to risks associated with concentrating its investments in Canadian issuers, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, derivatives, direct investments, emerging market securities, foreign currency transactions, foreign securities, global resources sector, other investment companies, management, market, operational, small- and medium-capitalization companies and special purpose acquisition companies. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation.
International Investors Gold Fund is subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. The Fund’s overall portfolio may decline in value due to developments specific to the gold industry. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic or social instability. The Fund is subject to risks associated with investments in Canadian issuers, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, concentration in gold-mining industry, derivatives, direct investments, emerging market securities, foreign currency transactions, foreign securities, other investment companies, management, market, non-diversification, operational, regulatory, small- and medium-capitalization companies and subsidiary risks.
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Real Asset Allocation ETF may be subject to risks which include, among others, in fund of funds risk which may subject the Fund to investing in commodities, gold, natural resources companies, MLPs, real estate sector, infrastructure, equities securities, small- and medium-capitalization companies, foreign securities, emerging market issuers, foreign currency, credit, interest rate, call and concentration risks, derivatives, cryptocurrency, cryptocurrency tax, all of which may adversely affect the Fund. The Fund may also be subject to affiliated fund, U.S. Treasury Bills, subsidiary investment, commodity regulatory (with respect to investments in the Subsidiary), tax (with respect to investments in the Subsidiary), risks of ETPs, liquidity, gap, cash transactions, high portfolio turnover, model and data, management, operational, authorized participant concentration, no guarantee of active trading market, trading issues, market, fund shares trading, premium/discount and liquidity of fund shares, and non-diversified risks. . Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund’s returns. Small- and medium-capitalization companies may be subject to elevated risks.
VanEck Merk® Gold Trust: This material must be preceded or accompanied by a prospectus for the VanEck Merk Gold Trust (the “Trust”). Before investing, you should carefully consider the Trust’s investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting vaneck.com/ounz or calling 800.826.2333. Please read the prospectus carefully before you invest. Investing involves risk, including possible loss of principal. The Trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for the purposes of the Commodity Exchange Act. Shares of the Trust are not subject to the same regulatory requirements as mutual funds. Because shares of the Trust are intended to reflect the price of the gold held in the Trust, the market price of the shares is subject to fluctuations similar to those affecting gold prices. Additionally, shares of the Trust are bought and sold at market price, not at net asset value (“NAV”). Brokerage commissions will reduce returns. The sponsor of the VanEck Merk Gold Trust is Merk Investments LLC (the “Sponsor”). Van Eck Securities Corporation and Foreside Fund Services, LLC, provide marketing services to the Trust.
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