The newest member of the innovative Van Eck family of exchange-traded funds is the Market Vectors-RVE Hard Assets Producers ETF (ticker: HAP), the first and only global hard assets ETF.
This ETF seeks to replicate the price and yield performance of The RogersTM—Van Eck Hard Assets Producers index, which was developed in concert with international investor Jim Rogers. Mr. Rogers is well known as a strategist inclined to have significant exposure to commodities and is negative on US markets and the US dollar.
Looking at the fact sheet, a number of facts jump out.
For the month of July the index was off roughly 11%, consistent with the pullback in commodities.
The ETF basket presently contains 321 securities.
The top ten companies account for 34% of the ETF's total assets.
Energy accounts for 40% of exposure, agriculture is at 30%, industrial and precious metals, 21%.
In terms of valuation, the ETF is trading at a price-earnings ratio of 22 and at 4.4 times book.
The US and Canada combined account for 45% of exposure and 34 countries account for 26%.
In an interesting twist, the company weightings are done on a global consumption basis rather than the conventional market cap basis.
All in all, as much as I disagree with Rogers on the future of the US market and economy, this is a solid choice for those looking for one ETF to cover what represents 15% of global GDP.
I would prefer less concentration and a smaller group of companies as well as less exposure to energy. Other good choices are the iPath Dow Jones-AIG Commodity ETN (DJP) which has only 20% exposure to oil and the Commodity and Precious Metals ETFfolios which allow investors to take a bit of a more targeted approach. I also like picking countries like Chile for copper exposure in my Country Rotation ETFfolio.
Rather than try to time commodities, investors should use allocations as core holdings offering good diversification and low correlation to equity markets. Build incrementally since prices are likely to fall more before the next leg of the secular bull market kicks in with a global recovery.