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Welcome to VanEck
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The VanEck Vectors® Real Asset Allocation ETF (RAAX™) uses a data-driven, rules-based process that leverages over 50 indicators (technical, macroeconomic and fundamental, commodity price, and sentiment) to allocate across 12 individual real asset segments in five broad real asset sectors. These objective indicators identify the segments with positive expected returns. Then, using correlation and volatility, an optimization process determines the weight to these segments with the goal of creating a portfolio with maximum diversification while reducing risk. The expanded PDF version of this commentary can be downloaded here.
Escalating trade tensions and the rising U.S. dollar both weigh on certain real assets.
|Average Annual Total Returns (%) as of July 31, 2018|
|1 Mo†||YTD†||1 Year||Life
|RAAX (Share Price)||-0.16||-||-||2.30|
|Blended Real Asset Index*||0.10||-||-||2.55|
|Average Annual Total Returns (%) as of June 30, 2018|
|1 Mo†||YTD†||1 Year||Life
|RAAX (Share Price)||-1.15||-||-||2.46|
|Blended Real Asset Index*||-1.08||-||-||2.45|
The table presents past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect temporary contractual fee waivers and/or expense reimbursements. Had the ETF incurred all expenses and fees, investment returns would have been reduced. Investment returns and ETF share values will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. ETF returns assume that distributions have been reinvested in the Fund at NAV.
†Returns less than a year are not annualized.
Expenses: Gross 0.81%; Net 0.74%. Expenses are capped contractually at 0.55% through February 1, 2020. Expenses are based on estimated amounts for the current fiscal year. Cap exclude certain expenses, such as interest, acquired fund fees and expenses, and trading expenses.
The largest contributors in July were natural resource equity positions—primarily steel, agribusiness, and coal equities. Interest rate sensitive holdings, REITs and MLPs, performed well despite interest rates continuing to rise. However, the positive performance was mostly offset by negative price pressures on commodities. Diversified commodities and gold bullion, which accounted for approximately 44% of the fund’s assets, were both down for the month.
Risks have increased in many real asset investments, and the model is adjusting. This month, RAAX added exposure to global infrastructure, decreased its diversified commodity exposure, and reduced the exposure to natural resource equities, while the REIT, gold bullion, and MLP exposures remained unchanged.
RAAX helps investors with the what, when, and how of real asset investing. This includes: (1) what to own; (2) when to be invested; and (3) how to allocate. Decisions are made on a monthly basis using our rules-based, quantitative allocation process.
RAAX only invests in asset classes that the model is bullish on, and the weightings themselves are not an indication of conviction but are instead determined by RAAX’s optimization process that seeks to maximize diversification and minimize volatility.
|Real Asset Segment||View||Rationale|
|Agribusiness Equities||Bullish||Bullish equity price trend; bearish commodity price trend; normal volatility; and bullish economic factors.|
|Coal Equities||Bearish||Bearish equity and commodity price trends; normal volatility; and bearish economic factors.|
|Global Infrastructure||Bullish||Bullish price trend; and normal volatility.|
|Gold Bullion||Bullish||Bearish commodity price trend; ordinary volatility; and sentiment is not extreme.|
|Gold Equities||Bearish||Bearish equity and commodity price trends; normal volatility; and sentiment is not extreme.|
|Diversified Commodities||Bullish||Bullish price trends; and normal volatility.|
|MLPs||Bullish||Bullish price trend; normal volatility; bullish economic factors; and typical credit spreads.|
|Oil Services Equities||Bearish||Bearish equity and natural gas commodity price trends; sentiment is extreme; bullish economic factors; bullish oil price trend; and normal volatility.|
|Unconventional Oil & Gas Equities||Bullish||Bullish price trends in the equities and oil prices; negative natural gas price trend; sentiment is extreme; bullish economic factors; and normal volatility.|
|Global Metal & Mining Equities||Bearish||Bearish equity and commodity price trends; bearish economic factors; and normal volatility.|
|Steel Equities||Bullish||Bearish equity price trend; bullish commodity price trend; and normal volatility.|
|REITs||Bullish||Bullish equity price trend; bullish economic factors; normal volatility, and typical credit spreads.|
Source: VanEck. Data as of August 2, 2018.
The model remains bullish on most real asset investments and is currently well diversified across natural resource equities, gold bullion, REITs, global infrastructure, MLPs, and commodities. Despite rising inflation and strong economic growth, escalating trade tariffs and a strong U.S. dollar are both putting downward price pressure on many commodities and commodity-related equities.
RAAX is responding to risks in the commodities markets by favoring real asset investments with less sensitivity to commodities. For August, RAAX added a 20% exposure to global infrastructure, diversified commodity exposure declined from 22% to 5%, and natural resource equity exposure was reduced from 33% to 30%. Within natural resource equities, it’s important to highlight how our positioning changed. We increased our agribusiness exposure from 8% to 20%, and removed allocations to coal equities, global metals and mining equities, and oil service equities. Agribusiness equities are unique relative to other natural resource equities. Historically, they have had a stronger correlation2 to the S&P 500® Index and a lower correlation to commodities than other natural resource equity investments.
Our cash allocation remains at zero. However, that may change next month if August proves to be another challenging month for real assets.
Real Asset Sector and Asset Class Weights
Source: VanEck. As of August 2, 2018.
Monthly Asset Class Changes
|Real Asset Segment||Aug-18||July-18||Change from Previous Month|
|Global Infrastructure||20%||0%||20%||New Position|
|Gold Equities||0%||0%||0%||No Change|
|Unconventional Oil & Gas Equities||5%||5%||0%||No Change|
|Master Limited Partnerships||5%||5%||0%||No Change|
|Steel Equities||5%||5%||0%||No Change|
|Gold Bullion||20%||20%||0%||No Change|
|Global Metals & Mining Equities||0%||5%||-5%||Decrease|
|Oil Service Equities||0%||5%||-5%||Decrease|
Source: VanEck. As of August 2, 2018. Past performance is not indicative of future results.
1Safe haven is an investment that is expected to retain its value or even increase its value in times of market turbulence.
2Correlation is a statistical measure of how two variables move in relation to one other.
Please note that the information herein represents the opinion of the author, but not necessarily those of VanEck, and these opinions may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Historical performance is not indicative of future results. Current data may differ from data quoted. Any graphs shown herein are for illustrative purposes only. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.
The Blended Real Assets Index consists of an equally weighted blend of the returns of Bloomberg Commodity Index, S&P Real Assets Equity Index, and VanEck® Natural Resources Index. Equal weightings are reset monthly. The S&P Real Assets Equity Index measures the performance of equity real return strategies that invest in listed global property, infrastructure, natural resources, and timber and forestry companies. The VanEck Natural Resources Index is a rules-based index intended to give investors a means of tracking the overall performance of a global universe of listed companies engaged in the production and distribution of commodities and commodity-related products and services. Sector weights are set annually based on estimates of global natural resources consumption, and stock weights within sectors are based on market capitalization, float-adjusted and modified to conform to various asset diversification requirements. The S&P Real Assets Equity Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2018 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
Any indices listed are unmanaged indices 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.
An investment in the Fund may be subject to risks which include, among others, fund of funds risk which may subject the Fund to investing in commodities, gold, natural resources companies, MLPs, real estate sector, infrastructure, equities securities, small- and medium-capitalization companies, foreign securities, emerging market issuers, foreign currency, credit, high yield securities, interest rate, call and concentration risks, all of which may adversely affect the Fund. The Fund may also be subject to affiliated fund, U.S. Treasury Bills, subsidiary investment, commodity regulatory, tax, liquidity, gap, cash transactions, high portfolio turnover, model and data, management, operational, authorized participant concentration, absence of prior active market, trading issues, market, fund shares trading, premium/discount and liquidity of fund shares, and non-diversified risks. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
Diversification does not assure a profit or protect against a loss.
The "Net Asset Value" (NAV) of a VanEck Vectors Exchange Traded Fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF's intraday trading value. VanEck Vectors ETF investors should not expect to buy or sell shares at NAV.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market.
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