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Van Eck Mutual Funds
01/14/15: With growing concerns about the world economy, copper prices endured their biggest one-day decline in over three years. Senior analyst Charl Malan believes that copper's decline may force companies to cut production "and that new projects, that are supposed to deliver a 5% supply growth in 2016, will not happen."View article »
11/03/14: "The strength of our investment team," explains Co-Portfolio Manager Shawn Reynolds, "is derived from our diverse backgrounds, which include not only strong technical and financial capabilities, but also our on-the-ground experience. We bring a unique investment approach based on this expertise which is critical to analyzing trends and prices in the industry."View article »
09/19/14: The Global Hard Assets Fund has earned a Zacks #1 Rank (Strong Buy) as Zacks "expect the fund to outperform its peers in the future."View article »
04/09/14: According to Charl Malan, “[Copper] companies are struggling to get projects on line…A year ago, the surplus for 2014 was much bigger than what we think it is today and in the numbers I am seeing today people are not discounting two very big mines that aren’t operating properly.”View article »
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The Fund underperformed its commodity equities-based benchmark index, the Standard & Poor’s® (S&P) North American Natural Resources Sector Index (SPGINRTR), which returned -13.86%. The Fund’s negative performance during the quarter was due primarily to its positions in the Energy sector.
The fourth quarter of the year saw an intensification of the macroeconomic headwinds that had already started to blow quite hard during the third quarter. The situation in Ukraine/Russia showed few signs of improvement and continued to weigh on the markets and, in particular, the Euro. Further sanctions were imposed upon Russia, the Ruble continued its slide, and interest rates in Russia rose to punitive levels.
In the East, following two quarters of negative growth, Japan fell, once more, back into recession. In the West, with Germany’s economy only displaying signs of slow recovery, Europe continued to stagnate and face disinflation/deflation. And, in the Middle East, the seriousness and extent of the threat posed by ISIS became ever more apparent.
When combined with the changed signals coming from the Fed mentioned in last quarter’s commentary, further strong economic growth in the U.S. (figures released at the end of December indicated that the pace of growth was the fastest for over a decade), and continuing worries about China, the result was not only a strong, but also a strengthening, U.S. dollar during the fourth quarter.
And, as the expectations for global growth sank further, commodities’ woes increased, with both the crude oil, and oil related stock, sell-off accelerating.
At the end of 2013, we noted seeing positive signs of possible inflections in GDP growth, particularly in developed markets. And, indeed, the first eight months of 2014 were characterized by reasonably buoyant economic activity. However, the dramatic recalibration of global growth outlooks – particularly in Europe, Japan, and Russia/Ukraine – in the third quarter only accelerated in the fourth quarter, leading to expectations of both slower growth and reduced commodity demand.
However, looking ahead, we do expect to see further easing by the European Central Bank. China, too, looks as if it may have begun an easing cycle. We also expect to see India to start easing. Currently though, global growth has yet to re-engage, despite the activity of policymakers globally.
The global mining restructuring story that has been unfolding over the past several years continues in its execution phase, with successful and unsuccessful companies starting to differentiate themselves more broadly. We still think that those companies that can execute on cost cutting and other enhancements to returns will outpace those who cannot. We believe, also, that we are beginning to see the effects of the capex reductions which commenced in 2012 in the form of lower production outlooks for the likes of copper, the Fund’s biggest metal exposure.
Read full 4Q Commentary »
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Edward I. Altman, Ph.D. and Fran Rodilosso, CFA
Max L. Heine Professor of Finance at the Stern School of Business, New York University; Senior Investment Officer, Fixed Income ETFs
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Portfolio Manager, Market Vectors® Municipal Bond ETFs
"There has been one overriding theme driving performance from the get-go in 2014: the supply-demand imbalance…. I see supply imbalance continuing throughout the remainder of 2014 and perhaps into the first quarter of 2015."
"[The] ratio of municipal credit rating downgrades to upgrades continues to narrow. That means that fundamentals at the local level are improving [and] credit quality is improving."
"We have a platform where we believe the Federal Reserve is going to modestly adjust its quantitative easing and provide us with a stable platform going forward with respect to interest rates."
Portfolio Manager, Market Vectors® Fixed Income ETFs
Metals & Mining Analyst
"We have a big problem within this industry in that it has to restructure itself, taking 4 million ounces that are unprofitable, bringing them down to 3 million ounces of more profitable or marginally profitable ounces."
"We continue to see a significant ban on nickel pig iron out of Indonesia, which in itself has put a significant amount of pressure on supply…what we've had from the end of last year through the beginning of this year is essentially 30% of the world's nickel supply being cancelled…that’s where the question becomes ‘what happens going forward?’…"
"I think one of the surprising things in the commodity markets this year has been that commodity indexes in general have outperformed other asset classes year to date, and it's really because of some unique supply disruptions we've had."
"There are three drivers of returns [for commodity investments]: the return on collateral or unused cash, the appreciation of the underlying commodities, and roll yield."
"Most index products had a fairly positive return, driven in particular by some soft commodities: grains, coffee, and protein. We believe these commodities’ appreciation was driven by some supply problems that were unexpected by the market."
Portfolio Manager, Van Eck Global Hard Assets Investment Team
"The U.S. energy renaissance is a remarkable resurgence in oil and gas production here in the United States... It’s up over 50% in the last five years, growing at a steep rate. There’s no other country or region in the world that has grown that fast that quickly in the last 30 or 40 years."
"We believe that towards the latter part of 2014 capital management, defined as cost management and CAPEX reductions, will be a potential significant kicker for higher earnings. It will ultimately develop into a higher rating for metals and mining companies through either a cash flow multiple or an EV/EBITDA multiple."
"We're headed toward the U.S. planting season and the USDA has come out with its initial estimates. They predict very good acreage numbers, both in corn and soy. Assuming normal weather, we expect another good crop which should ultimately put some downward pressure on prices."
"Between the difficulty of obtaining new commodity sources and continued emerging markets growth, we believe the underlying demand will continue to grow."
"Amongst the three drivers: commodity exposure, roll exposure, and collateral exposure, CMCAX does a great job of isolating commodity exposure. It does that through its constant maturity approach to reduce the roll risk, does not take collateral risk, and maintains a very short-term Treasury bill-holding which essentially eliminates collateral risk."
"We see many opportunities in the Permian Basin, in West Texas, which is divided into two areas: the Midland eastern basin and the Delaware western basin. The Midland Basin is a bit more advanced than the Delaware basin but we have exposure to both regions."
Understand the "constant maturity" concept that is key to Van Eck CM Commodity Index Fund (CMCAX)
Senior Investment Officer, Fixed Income ETFs
"CBON is the first ETF designed to provide access to the Chinese onshore bond market. What the Index contains are bonds issued by the Chinese government, by quasi-government institutions, such as policy banks, and by credit issuers, such as corporate issuers in China. The weightings in the Index are generally 20% government, 30% policy banks, and 50% corporate issuers."
Eric Fine and Fran Rodilosso
"The Hong Kong protests are not likely to impact credit markets in any direct sense. We do think, however, that these types of protests are likely to increase around the world....atomization is happening and we're going to see more of this in Europe and perhaps in other countries."
"We hope that you will join us for a discussion about emerging markets debt, the evolution of the asset class, and how that evolution has been reflected in the development of emerging economies in mostly positive ways. While we hope that many of you will agree with our points of view on emerging markets, and more specifically on emerging markets debt, we know that some of you will certainly disagree. In either case we look forward to a spirited discussion about emerging markets debt and the variety of opportunities that lie within it."
Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Strategy
"Our starting point is comparing countries' fundamentals to what premium you're getting. Are you getting paid for that risk? Looking at fundamentals alone and putting the important technical default issues to the side, one finds that Argentina is cheap. It's paying spreads that are too high for its fundamentals."
"The Russian economy was already in bad shape when it entered this crisis. It was saddled with high inflation, low growth, and to a large extent, the country's just a gas station. It's very dependent on one product that is central to the economy."
"Although the emerging markets debt universe has grown significantly over the past decade, there are some interesting fundamental aspects…. Sovereign issuers are actually on average less indebted than they were a decade ago….By virtue of issuing more in their own currencies, however, emerging market issuers are also less exposed to currency volatility and the effects it can have on their solvency."
"We still believe that the Fed will have difficulty navigating an elegant exit to a combination of quantitative easing and zero interest rate policy, particularly as we're seeing some volatility in inflation numbers. [As for Emerging markets debt], even after outperforming most markets during the first half of 2014, [the market] may still have room to do well in the second half."
"The emerging markets are not a single asset class, nor obviously a single country or region. There are pockets that are in a period of crisis… I would be remiss to talk about a potential crisis without discussing China, which has grabbed so many headlines this year."
"As a fixed-income investor, some key themes for 2014 are not that different from 2013. We believe that it may make sense to shorten duration, and to take on some additional credit risk to make up for the loss of yield by moving to shorter durations appear to makes sense."
Eric Fine and Natalia Gurushina
Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team
"I think Poland is uniquely positioned to benefit from Germany's rebound... My key concern about Poland, however, is potential exposure to change in sentiment from political risks in Ukraine."
"The macroeconomic fundamentals in Turkey are getting worse. Turkey is vulnerable, but it’s always been vulnerable. It’s never had enough reserves. Its real interest rates have never been that satisfying. But the political context is the worst I’ve seen in twenty years."
"The scenario of civil war and perhaps a civil war that has broader implications for the region is a scenario we have to think about. It's hard to assign probabilities to that, but the market seems to be saying it's a zero and I think zero is definitely the wrong answer."
Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Fund
"I don't have a blanket answer that says the taper is just not an issue for EM, but I do think it's been priced in generally. I think some countries have been able to react, and if tapering's happening because of good final demand, because economies are growing, then that's a high-quality problem for EM countries."
"In one word, the value of an unconstrained approach to emerging markets bond portfolio investing is ‘flexibility’. The market changed a lot in the past 20 years. At first, it was only hard currency bonds. Then came hard currency corporates followed by local currency sovereigns. Nowadays, local currency corporates are becoming more prominent. Having an unconstrained mandate is key to optimizing the portfolio using all four sub asset classes."
"EMAG offers a way for investors to gain broad exposure to emerging markets fixed income, both hard currency and local currency, in their portfolios….EMAG encompasses the broad opportunity set within the emerging markets fixed-income space."
Senior Vice President of Finance & Head of Investor Relations, Fifth Street Finance Corp.
Director of Basic Materials Research, Chair of Economic Moat Committee
Director of Manager Research, Multi-Manager Alternatives Investment Team
Stipp & Larson
Jan van Eck
"The emerging markets have been rewarded for their reform moves. Mexico is a country that has gotten its act together in terms of instituting reforms in areas such as energy policy. No longer is Pemex the sole developer of all Mexican energy assets and I think that's very positive in the long run."
Portfolio Manager, Van Eck Emerging Markets Equity Strategy
Director and Portfolio Manager of China Asset Management (Hong Kong) Limited
"In terms of the number of stocks, market cap, and daily turnover, onshore A-shares are three times the size of offshore Chinese equities. As an investor, we should not ignore the Chinese A-share market if we want to invest in China to enjoy its economic growth."
"Small caps typically belong to the New Economy. They are operating in sectors such as internet, technology, media, consumption, and services. These are well-supported by social policy change that has been emphasized by top leaders in the past few years."
"[One of the] significant reforms that we are talking about is state-owned enterprise reform... our research says that historically there is a big gap in ROE between state-owned enterprises and private enterprises."
Portfolio Manager, Van Eck Emerging Markets Investment Team
"There are large companies and large sectors in the emerging markets that we don't think have a particularly good outlook right now. However, we believe that we can find some opportunities that are structural growth opportunities that play on what people think they're getting with emerging markets but normally often don't achieve with many of the more index-driven products."
Founder and Chief Invesment Officer, BlueStar Indexes
"There have been positive surprises in the economy, both because of fiscal discipline, greater tax receipts, and the fact that energy exports are starting to come online. We’re very positive on the Israeli economy."
"The research we do at BlueStar looks at both valuations and technical patterns in the market. Even though the BlueStar Israel Global Index has had a very strong rally and could be due for a pause, we expect further highs in 2014."
Director of ETF Research, Zacks Investment Research
"Indonesia’s economy has grown at an annual rate exceeding 5% in seven of the past eight years, mainly due to increasing consumption by the rising middle class."
"Vietnam continues to be the main beneficiary of the migration of low-end manufacturing out of China as the producers try to take advantage of wages that are about half of that in China."
Portfolio Manager, Senior Gold Strategist
"[Companies] such as Barrick, Newmont, and AngloGold went through a period of conglomeration when large companies were merged together to create what we call "super-majors” and it's very hard to sustain the super major model."
"We've seen subdued M&A activity over the last several years due to the recent bear market in gold. This year, however, there has been a significant pickup."
Joe Foster and Ima Casanova
Gold Investment Team
"We invest across the spectrum, but in Burkina, it is mostly mid-tier and junior companies that are active. Most of Burkina’s gold deposits are moderate to smaller-sized, so we find smaller companies there. Because of the favorable operating environment, there are quite a few interesting opportunities."
"Emerging markets geopolitical risks have probably been the main driver of gold this year. People are worried about financial stability with headlines coming from Thailand, Venezuela, Ukraine, and Turkey. People are also concerned about the growth in China and the Chinese banking system."
Joe Foster and Ima Casanova
Gold Investment Team
"The market focused more on cost and operating results, and did not necessarily punish companies that missed earnings expectations"
"There have been some exciting discoveries, some great drill results, come out of the Dominican Republic."
"Greece is taking a second look at mining and we are seeing some of it gold properties being developed. They have created a fast-track program for new businesses..."
“Hard assets” refers to
the natural resources or commodities that are mined, exploited, harvested or
otherwise procured globally.
Hard assets have traditionally been
grouped into five broad categories:
Oil, natural gas, electricity, coal, and new/renewable alternative energy
2) Precious Metals Gold, silver,
palladium and platinum
3) Base/Industrial Metals Copper, aluminum, steel, iron and nickel
Agriculture Corn, wheat, sugar and water
Forest Products Timber, pulp and paper
Unless otherwise stated, portfolio facts and statistics are shown for Class A shares; other classes may have different characteristics.
†NAV: Unless you are eligible for a waiver, the public offering price you pay when you buy Class A shares of the Fund is the Net Asset Value (NAV) of the shares plus an initial sales charge. The initial sales charge varies depending upon the size of your purchase. No sales charge is imposed where Class A or Class C shares are issued to you pursuant to the automatic investment of income dividends or capital gains distributions. It is the responsibility of the financial intermediary to ensure that the investor obtains the proper “breakpoint” discount. Class C, Class I and Class Y do not have an initial sales charge; however, Class C does charge a contingent deferred redemption charge. See the prospectus for more information.
1Van Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.38% for Class A, 2.20% for Class C, 1.00% for Class I, and 1.13% for Class Y of the Fund’s average daily net assets per year until May 1, 2015. During such time, the expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation.
Van Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent
the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and
interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.38% for Class A, 2.20% for Class C,
1.00% for Class I, and 1.13% for Class Y of the Fund’s average daily net assets per year until May 1, 2015. During such time, the
expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation.
2The S&P® North American Natural Resources Sector Index (SPGINRTR) includes mining, energy, paper and forest products, and plantation-owning companies. The S&P® 500 Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sectors. The S&P® Goldman Sachs Commodity Total Return Index (SPGSCITR) is a composite index of commodity sector returns, representing an unleveraged, long-only investment in commodity futures. All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.
The views and opinions expressed are those of Van Eck Global. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary.
You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with concentrating its investments in hard assets and the hard assets sector, including real estate, precious metals and natural resources, and can be significantly affected by events relating to these industries, including international political and economic developments, inflation, and other factors. The Fund’s portfolio securities may experience substantial price fluctuations as a result of these factors, and may move independently of the trends of industrialized companies. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation. The Fund is subject to risks associated with investments in debt securities, derivatives, commodity-linked instruments, illiquid securities, asset-backed securities and CMOs. The Fund is also subject to inflation risk, short-sales risk, market risk, non-diversification risk, leverage risk, credit risk and counterparty risk. Please see the prospectus for information on these and other risk considerations.
Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and summary prospectus contain this and other information. Please read them carefully before investing.
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