iShares Rolls Out Commodity-Focused Equity ETFs

by on February 3, 2012 | ETFs Mentioned:

iShares, the largest U.S. ETF issuer in terms of both assets and number of funds, continued the aggressive expansion of its product lineup this week with five new products offering exposure to commodity-related stocks. Each of the new ETFs will compete with existing products offering indirect exposure to natural resources through stocks of companies that are engaged in the exploration, production, and sale of various commodities [for updates on all new ETFs, sign up for the free ETFdb newsletter]. 

MSCI Global Agriculture Producers Fund (VEGI)

This ETF seeks to replicate a benchmark that consists of global agribusiness stocks, including fertilizer and chemical companies, farm machinery manufacturers, and food and meat packagers. The underlying index consists of about 170 different stocks from a number of developed and emerging markets, with the top country allocations being the U.S. (42%), Canada (14%), and Switzerland (8%). Agribusiness stocks have seen significant interest in recent years amidst intensifying concerns about food shortages in the future as the world population continues to climb. Moreover, emerging markets such as China have aggressively pursued investments in agribusiness as a way to feed increasingly large and wealthy populations [see Commodity Guru ETFdb Portfolio].

VEGI joins a number of other agribusiness ETFs, including the ultra-popular Market Vectors Agribusiness ETF (MOO has grown to almost $6 billion), PowerShares Global Agribusiness Portfolio (PAGG), and IQ Global Agribusiness  Small Cap ETF (CROP). The new iShares has a considerable edge in one key area; the expense ratio of just 0.39% beats all of the competing funds by at least 20 basis points.

MSCI Global Energy Producers Fund (FILL)

This ETF offers exposure to the global energy sector, specifically targeting energy and exploration companies. The underlying index explicitly excludes companies that derive their revenues primarily from marketing, storage, or transportation of oil and gas, as well as alternative fuel companies. FILL’s index consists of more than 300 individual stocks from around the globe, though U.S. companies account for about 46% of assets. Other large country allocations are made to the UK (19%) and Canada (11%). The largest holdings in FILL include several well known oil firms, such as Exxon, Chevron, BP, Shell, Total, and ConocoPhillips.

There are now more than two dozen ETFs in the Energy Equities ETFdb Category, with combined assets of more than $15 billion. FILL will also charge 0.39%, which puts it well below the category average of 0.51% [see ratings for energy ETFs].

MSCI Global Select Metals & Mining Producers Fund (PICK)

This ETF offers exposure to the global mining sector; the underlying MSCI ACWI Select Metals & Mining Producers Ex Gold & Silver Investable Market Index includes companies engaged in the extraction and production of diversified metals (about 62% of holdings), aluminum (3%), steel (33%), and precious metals and minerals excluding gold and silver (3%). PICK consists primarily of international companies, with the U.S. making up just about 11% of holdings. The largest country allocations include the UK (25%), Australia (19%), Brazil (10%), and Japan (6%).

The largest individual holdings of PICK are all well known mining giants, including BHP Billiton, Rio Tinto, Vale, XStrata, Rio Tinto, and Freeport McMoran. This ETF also charges an expense ratio of just 0.39%, which makes it just a bit more expensive than the SPDR S&P Metals & Mining ETF (XME charges just 0.35%). The appeal of PICK may lie in the depth of holdings; the new iShares ETF is linked to an index consisting of more than 360 individual stocks, while XME has only about 40 components and focuses only on U.S.-listed securities.

MSCI Global Gold Miners Fund (RING)

This ETF is linked to an index that consists of companies that derive the majority of their revenues from gold mining and do not hedge their gold exposure–a feature that could help to strengthen the correlation to spot gold prices [see our GLD-Free Gold Bug ETFdb Portfolio]. RING has about 40 holdings in total, with the largest weights going to gold mining giants Barrick Gold (16%), Goldcorp (12%) and Newmont Mining (9%).

The gold mining ETF space is already quite crowded; RING will be competing with products such as the Market Vectors Gold Miners ETF (GDX has about $7.5 billion in assets and ADV of almost 7 million shares) and the Global X Pure Gold Miners ETF (GGGG). The new iShares ETF could compete on expenses; at just 39 basis points it is by far the cheapest option on the market.

MSCI Global Silver Miners Fund (SLVP)

This ETF offers exposure to a basket of about 30 global silver mining companies, including Silver Wheaton (19% of assets) and Cia de Minas Buenaventuras (11%). Not surprisingly, Canada (58%) and Peru (12%) are the largest country allocations in the underlying portfolio. SLVP isn’t necessarily a “pure play” on silver, since a number of the component firms generate significant chunks of revenue from gold as well as various industrial metals. According to the SLVP fact sheet, about a quarter of the underlying index consists of gold miners. It is interesting to note that both RING and SLVP count Peruvian mining giant Cia de Minas Buenaventura among their ten largest individual holdings.

The Global X Silver Miners ETF (SIL), which debuted in 2010 and has assets of more than $350 million, focuses more specifically on companies that derive revenues primarily from silver.

Disclosure: No positions at time of writing.