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Although commodities have been strong performers so far in 2011, many products have faced significant headwinds in December. In addition to fears over a slowdown in Europe and especially China, the dollar has reversed its recent trend and has strengthened, adding to the losses for many commodity products. While commodity futures have been hit hard by this trend, firms that produce these vital goods have also seen weakness, sometimes exceeding the losses that their underlying products have experienced on the year.
This has been the case for some of the most popular commodity producer ETFs on the market today across a variety of sectors. Funds such as WisdomTree’s Global Natural Resources ETF (GNAT - ETF report) or State Street’s Global Natural Resources SPDR (GNR - ETF report) have both lost close to 20% on the year, despite their diversified natures and broad geographic focus (see ALPS Shutting down Two Commodity Producer ETFs). Yet, not all products have performed the same in this trying time as some have managed to lose less than most thanks to their focus and methodology for selecting assets. One such product that falls into this category is the Market Vectors RVE Hard Asset Producers Fund (HAP - ETF report), the nearly $160 million dollar ETF from Van Eck (see Top Three Precious Metal Mining ETFs).
Hard Asset Producers ETF In Focus
The fund tracks the Rogers-Van Eck Hard Assets Producers Index which is a rules-based benchmark gives investors a means of tracking the performance of a global universe of listed companies engaged in the production and distribution of hard assets and related products and services. The index was developed in concert with Jim Rogers the legendary commodity investor who is best known for his books and starting the Quantum Fund with George Soros.
Besides the inclusion of Jim Rogers’ input, this may sound similar to other products in the space. However, there are a few key differences that investors should be aware of when comparing this fund to others in the commodity producer ETF space. First, it is worth noting that the fund includes securities that are based in the water and renewable energy sectors. This can give the fund a different profile than similar funds in the category while also allowing for a more diversified—and potentially complete—picture of the commodity sector (read Is USCI The Best Commodity ETF?).
Still, firms engaged in the energy and materials sector dominate the holdings, making up nearly 80% of the total. However, the remaining 20% of the portfolio is divided up quite nicely among a variety of industries which could be a solid diversifying agent for those seeking exposure to the space beyond these two key sectors. In fact, consumer staples take up 9.6% while industrials and utility firms make up another 8% of the assets, helping to round out the holdings profile. In terms of individual securities, the fund holds close to 336 companies in total with the highest weightings going towards ExxonMobil (XOM - Analyst Report), Monsanto (MON - Analyst Report), and Potash Corp of Saskatchewan (POT - Analyst Report).
Possibly thanks to the inclusion of sectors beyond agricultural products and oil, HAP has outperformed its counterparts GNR and GNAT over the course of 2011, losing about 100 basis points less than the other two major funds in the space. This outperformance was also evident over the past six month period as well, as HAP outperformed both of its counterparts by at least 125 basis points in the time frame. Whether this stretch of beating out its counterparts in the space can continue is uncertain, but for investors seeking for a new way to play the space that includes all commodity producers, Van Eck’s HAP could be the way to go (see Three Best Gold ETFs).
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