PRETORIA, South Africa () -- Van Eck Global's Market Vectors - Nuclear Energy ETF [Amex:NLR] made its debut on the American Stock Exchange August 15, offering individual U.S. investors a cost-effective means of investing in a broad portfolio of companies involved in nuclear energy.
The Nuclear Energy exchange-traded fund (ETF) is designed to track the price and yield performance of Deutsche Borse's DAXglobal Nuclear Energy Index (DXNE), which consists of a basket of 38 nuclear energy companies listed on global exchanges. With uranium prices soaring and nuclear energy expected to provide an increasing proportion of the world's electricity, the Index has generated returns of 45.2% and 30.8% over three- and five-years, respectively.
NLR is the sixth and latest of a string of firsts in natural resources related exchange-traded (ETF) fund launches on the Amex put together by New York-based asset manager Van Eck Global under its Market Vectors brand.
Nuclear Growth
Nuclear energy supplies 16% of the world's electricity and has the potential to double in size by 2030, according to Van Eck. "The world's need for energy is expected to grow along with the global economy. If nuclear energy maintains its current share of world electricity production, the nuclear energy industry could double in size by 2030. If it increases its share, which we think is likely, it will grow even faster," Jan van Eck, a principal at Van Eck Global, stated in a media release.
"We think nuclear energy will assume an increasingly important role as a source of alternative energy. As the first ETF listed in the U.S. to target the global nuclear energy industry, we believe that NLR will appeal to investors looking for a convenient means to gain exposure to that industry."
Among the NLR market capitalization-weighted ETF's top ten constituents are uranium mining companies, such as Cameco Corp. [TSX:CCO; NYSE:CCJ] and Paladin Resources Ltd. [TSX:PDN] as well as nuclear plant builders, such as Japan's Kajima Corp. and Mitsubishi Heavy Industries Ltd. Constituent companies in general derive at least 50% of their revenue from nuclear energy, according to Van Eck.
The underlying DXNE index is made up of the shares of 38 companies with a market capitalization of US$110 billion. In addition to uranium miners and nuclear plant construction companies it also includes companies engaged in uranium enrichment and storage, nuclear fuel transportation, nuclear energy generation and manufacturing equipment.
A Winning Formula
ETFs have become all the rage with investors, particularly when it comes to energy and natural resources exploration, development and management. Surging oil and commodities prices and concerns about climate change have led investors to pour capital into companies developing renewable, alternative energy technology and governments around the world to adopt fiscal, legislative and regulatory measures to support them.
Passively managed baskets of securities that trade like common shares, ETFs offer individual investors a means of investing in diversified portfolios that are passively managed and are typically tied to a broad-based or more narrowly defined index of shares in underlying companies or commodities.
The ability to go long and short ETFs, their liquidity, comparatively low expense ratios and transaction costs and relative tax efficiency are cited as reasons for their rapid growth. In addition, ETFs also typically have associated listed options or futures contracts, offering investors greater leverage and hedging opportunities than mutual funds and other similar investment vehicles.
Founded in 1955, Van Eck Global now manages more than US$6 billion in assets. NLR is the sixth in the company's Market Vectors family of ETFs. Environmental Services, Global Alternative Energy, Gold Miners, Russia and Steel are the other five. In sum, these had more than US$1 billion in assets under management as of the end of July.
Van Eck-Deutsche Borse Collaborations
Again collaborating with the Deutsche Borse, Van Eck's seventh Market Vectors - Agribusiness ETF [Amex:MOO] is expected to make its debut on Amex soon. The Agribusiness ETF is designed to track the DAXglobal Agribusiness Index (DXAG), which is made up of 40 publicly traded companies involved primarily in agricultural product operations, chemicals, equipment, ethanol and biodiesel and livestock operations.
A previous Van Eck-Deutsche Borse collaboration brought the Market Vectors - Russia ETF to market in March. Based on the DAXglobal Russia+ Index, the Index is made up of 30 Russian companies listed on global exchanges, either through depositary receipts or local Russian shares.
The Index rose 5.43% in July and has gained 10.96% through the fist seven months of 2007. Reflective of Russia's rich natural resource base and modernization efforts, the Index includes listed equities of the country's largest energy companies, such as Lukoil, OAO Gazprom and Surgutneftgaz, JSC MMC Norilsk Nickel, steel manufacturers Mechel OAO and Evraz Group SA, and telecommunications service providers Mobile TeleSystems and Vimpel Communications.
Environmental ETFs
Booming interest, and investment, in companies involved in renewable, alternative energy, clean technology and environmental services has been another successful investment sector for Van Eck's ETFs.
The asset manager on August 3 announced that The Ardour Global Index (Extra Liquid) (AGIXL) rose 3.12% in July and has increased 29.41% in value in the seven months ending July 31, 2007. Van Eck's Market Vectors - Global Alternative Energy ETF [NYSE:GEX] tracks the value of the Index, which, guided by a set of investment rules, itself tracks a set of companies engaged in a broad range of alternative energy activities.
Approximately 72% of the 30 equities in the Index are engaged primarily in the development of solar, wind, ethanol, biofuels, water and geothermal power. Ardour Global Indexes LLC was founded in 2005 as a partnership between Ardour Capital Investment and Network Energy Technologies LLC expressly for the purpose of developing investment benchmarking tools for the global alternative energy industry.
The index underlying Van Eck's Market Vectors - Environmental Services ETF, the Amex Environmental Services Index (AXENV) meanwhile fell 3.46% in July but is up 11.77% for the first seven months of 2007.
The Index is comprised of the common stock or ADRs of 24 companies involved in waste management and a range of environmental services, including waste collection and disposal, hazardous waste services, recycling, environmental remediation and clean-up services, wastewater management and environmental consulting to residential, industrial, municipal and commercial customers.
