By Coulter Regal, CFA, Product Manager
This blog answers commonly asked questions about the NLR ETF and explores how the global shift towards clean energy is impacting the uranium and nuclear energy industries.
With the global energy landscape gradually tilting towards cleaner and more sustainable sources, the uranium and nuclear energy industries are gaining traction with investors. This blog aims to address common inquiries regarding the VanEck Uranium+Nuclear Energy ETF (NLR), which offers an efficient means for investors to access these pivotal sectors. Through NLR, investors have the opportunity to tap into the uranium and nuclear energy market, unlocking the potential growth of the global shift towards cleaner energy solutions.
- What is the VanEck Uranium+Nuclear Energy ETF (NLR)?
- How is the portfolio composition determined for NLR?
- How has the global shift towards clean energy impacted the nuclear energy industry?
- How much exposure does NLR have to uranium miners?
- What are the risks associated with investing in uranium and nuclear energy?
- Where does NLR fit into a portfolio?
- Does NLR generate Schedule K-1 tax statements?
- How can investors buy VanEck ETFs?
What is the VanEck Uranium+Nuclear Energy ETF (NLR)?
The VanEck Uranium+Nuclear Energy ETF (NLR) is an exchange-traded fund that provides investors with comprehensive exposure to companies operating within the nuclear energy and uranium industries. By investing in NLR, individuals can tap into the broad nuclear energy industry which encompasses activities such as uranium mining, nuclear power generation, and the provision of equipment and services related to nuclear energy. Additionally, NLR offers global exposure as it includes companies from various regions, thereby allowing investors to benefit from the nuclear energy sector’s growth and advancements worldwide.
How is the portfolio composition determined for NLR?
The portfolio composition of NLR is determined based on a passive management strategy, seeking to replicate the performance of the MVIS Global Uranium & Nuclear Energy Index. This is a market cap weighted index that is designed to track the overall performance of companies involved in the nuclear energy and uranium industries. This includes companies engaged in uranium mining, the construction, engineering, and maintenance of nuclear power facilities and nuclear reactors, the production of electricity from nuclear sources, and providing equipment, technology, and/or services to the nuclear power industry. To be eligible for inclusion, a company must generate, or be expected to generate, at least 50% of its revenues from these business activities resulting in comprehensive and pure-play exposure to the industry.
How has the global shift towards clean energy impacted the nuclear energy industry?
The global shift towards clean energy has cast a spotlight on the nuclear energy and uranium industries as potential, or even necessary, contributors to a low-carbon energy future. Nuclear power is seen as a viable alternative to fossil fuels as it generates a substantial amount of electricity with minimal greenhouse gas emissions. This perspective has fostered a renewed interest in nuclear energy leading to new nuclear power projects, research into advanced nuclear technologies, and the exploration and development of new uranium mining sites to meet anticipated demand.
Additionally, there have been positive shifts on the policy front. More and more, governments are revisiting their nuclear energy policies to align with their carbon reduction goals. There is a growing recognition of the role nuclear power can play in achieving a low-carbon energy mix, especially as part of a balanced energy portfolio that includes renewables, like wind and solar, which can be intermittent in their ability to deliver energy. International collaborations and agreements are also emerging to promote nuclear energy development and to establish a global framework for nuclear safety and security.
In short, the global shift towards clean energy is fostering a conducive environment for the growth and development of the nuclear energy complex that is expected to be supportive of the companies operating within the industry.
How much exposure does NLR have to uranium miners?
The VanEck Uranium+Nuclear Energy ETF (NLR) provides exposure to a variety of companies within the nuclear energy industry, which includes uranium mining companies, among others. NLR tracks a passive market-cap weighted index that reflects the broader industry, providing a balanced exposure to various facets of the nuclear energy value chain. Generally, companies operating within the uranium mining segment have accounted for roughly half of NLR’s exposure. However, the degree of this exposure to uranium miners can vary based on factors including market conditions and the performance of companies within the sector.
For current information on the exposure to uranium miners and other segments of the nuclear energy sector, please visit NLR’s product page where up-to-date holdings are available.
What are the risks associated with investing in uranium and nuclear energy?
Investing in nuclear energy brings forth a mix of opportunities and challenges. While advancements in nuclear technologies and energy policy reformation present promising investment prospects, there are also inherent risks. Companies operating in the industry may face developmental hurdles such as unforeseen costs or delays in nuclear reactor projects due to technical complexities, stringent regulatory compliance, or public opposition. The sector is also highly susceptible to policy shifts, which can be triggered by major incidents or the emergence of alternative energy technologies, thereby altering the regulatory and investment landscape. Additionally, volatility in uranium prices, driven by supply-demand dynamics and geopolitical factors, can directly impact the revenues of mining companies and the nuclear fuel costs that power generators must ultimately pay.
Where does NLR fit into a portfolio?
NLR can be integrated into an investment portfolio as a long-term strategic allocation providing both diversification benefits and access to the potential growth opportunity amidst the global push towards clean energy. Additionally, because of its targeted exposure, NLR can be used more tactically by investors to express a shorter-term view of the nuclear energy industry in an efficient and low-cost way.
Does NLR generate Schedule K-1 tax statements?
No. Unlike an investment in many commodity strategies, the equities of uranium miners and other nuclear energy companies do not generate burdensome K-1 tax statements.
How can investors buy VanEck ETFs?
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
MVIS Global Uranium & Nuclear Energy Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Securities Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Uranium+Nuclear Energy ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.
An investment in the Fund may be subject to risks which include, but are not limited to, risks related to investments in nuclear energy companies, energy sector, utilities sector, special risk considerations of investing in Asian, Canadian and European issuers, foreign securities, foreign currency, depositary receipts, small- and medium-capitalization companies, cash transactions, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, issuer-specific changes, non-diversified, index-related concentration and high portfolio turnover risks, all of which may adversely affect the Fund. 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 that may negatively impact the Fund’s return. Small- and medium-capitalization companies may be subject to elevated risks.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com/etfs. Please read the prospectus and summary prospectus carefully before investing.
© 2023 Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
Originally published 2 November 2023.
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