St. LOUIS () -- Van Eck Global is hoping to add another innovative exchange traded fund (ETF) to its family of Market Vectors with the launch of the world's first nuclear energy ETF this fall. The New York-based fund advisor filed with the SEC last month with plans to launch its new fund in the U.S. in fall 2007.
Kathy Lang of Van Eck told RI that it will take about two and half months to hear back from the SEC, then the product will launch shortly thereafter on a U.S. exchange to be determined. She assured RI that the ETF would be available sooner than six months.
The Market Vectors - Nuclear Energy ETF will track the DAXglobal Nuclear Energy Index, a modified market-cap index that tracks global companies from uranium miners through final electrical generation, to be published by Deutsche B"orse AG.
The Nuclear Energy Index will be comprised of common stocks and depository receipts that are listed for trading on major stock exchanges around the world, calculated using a modified market capitalization weighting methodology.
The index will be comprised of companies with market capitalizations greater than $150 million that have a worldwide average daily trading volume of at least $1 million and have maintained a monthly trading volume of 250,000 shares over the past six months.
Lang said the index is not yet completed, but the company will start work once it hears back from the SEC. However, all companies will derive at least 50% of their total revenues from the nuclear energy business.
The fund will normally invest at least 80% of its total assets in equity securities of U.S. and foreign companies primarily engaged in seven sub-sectors:
- Uranium mining
- Uranium enrichment
- Uranium storage
- Uranium and nuclear equipment
- Nuclear plant infrastructure
- Nuclear fuel transportation
- Nuclear energy generation
Van Eck will utilize an indexing investment approach to approximate the investment performance of the Nuclear Energy Index by investing in a portfolio of securities that generally replicate the index.
Because of the passive investment management approach of the fund, Van Eck expects the portfolio turnover rate to be under 30%, generally a lower turnover rate than for many other investment companies.
Van Eck anticipates that the fund will hold all of the securities which comprise the Nuclear Energy Index in proportion to their weighting. As such, the Nuclear Energy fund will normally invest at least 95% of its total assets in securities that comprise the Nuclear Energy Index.
Although Van Eck's fund would be the world's first broad-based nuclear energy ETF, there is another fund that operates much like a pure-play uranium ETF: Uranium Participation Corp [TSX:U], managed by Denison Mines [AMEX:DNN; TSX:DML].
Launched in , Uranium Participation Corp. (UPC) was created to invest in, hold and possibly sell uranium oxide in concentrates (U308). UPC reported its net asset value at May 31, 2007 was C$892.66 million with 4.2 million pounds of U308 and 1.2 million kilograms of uranium hexafluoride (UF6).
In , New City Investment Mangers launched Geiger Counter Limited, a mutual fund focussed on investing in uranium and nuclear power opportunities, on the London Stock Exchange [LSE:GCL] and Channel Islands Stock Exchange [CISX:GCL].
The fund invests in companies involved in the exploration, development or production of uranium, but also fossil fuels and potential alternative energy supplies.
Global Uranium Fund was designed to capitalize on strong investment fundamentals in the uranium sector by investing in companies who are producing or developing deposits, with some exploration issuers that "offer significant growth potential."
In , NYMEX launched the world's first on and off-exchange traded uranium futures after signing a 10-year agreement with the Ux Consulting Company. The contract trades under the symbol UX with a minimum contract size is 250 pounds of uranium U3O8, with the June contract last priced at $137/lb.
As the uranium price closes in on $140/lb, now reportedly $138/lb, investors are likely to see many more vehicles emerge in the uranium and nuclear energy sectors.