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Natural Resources and Commodities

Video Transcript

The Long/Flat Approach to Commodity Investing


Morningstar Long/Flat Commodity Index

DAN LEFKOVITZ: The Morningstar® Long/Flat Commodity IndexSM provides dynamic exposure between twenty different commodities and cash. Just like a professional commodities trader would, we use momentum as a signal. When a particular futures market for a commodity is exhibiting positive momentum, we maintain long exposure to that commodity. When the trend reverses, we move into cash. The goal of the index is really to maximize both sources of excess return, the commodities futures market price return and roll yield.


Why Long/Flat?


LEFKOVITZ: A traditional long-only approach works well for traditional asset classes, but commodities are different. If you look at the commodities futures market, the net supply is really zero. For every long position, there's also a short, because you have producers and consumers hedging their positions. You have commodities traders who are taking both long and short positions. And this is why you see a lot of disparity across indexes that provide exposure to the commodities market. You see a lot of commodities investment strategies that don't really offer exposure to commodities prices because of phenomena like contango and backwardation. So we've created an index that uses momentum, like a commodities trader would, vis-à-vis a long-only commodities index. So this may potentially provide better diversification and mitigate investors' exposure to negative roll yield.


Why a 12-Month Momentum Signal?


LEFKOVITZ: Commodities markets exhibit a significant degree of momentum. It takes time for supply-demand imbalances to work themselves out with commodities. So through our empirical research, we concluded that a twelve-month time frame provided the most complete picture of a momentum indicator. It's simple and intuitive. In agriculture, for example: twelve months includes all four seasons -- it's the entire cycle of production.


Commodities Sector Exposure


LEFKOVITZ: Our long/flat commodity index provides exposure to twenty individual commodities across four major commodities sectors: energy, metals, agriculture, and livestock. And the individual constituents will vary based on the size of their individual future contract value. But in the index, at any one point in time, we're likely to see crude and natural gas, gold and silver, corn and wheat, cattle and hogs. Unlike some indexes on the market, we cap exposure to individual commodities within the index.


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IMPORTANT DISCLOSURE

The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about VanEck Funds, VanEck Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com.

Please note that Van Eck Securities Corporation offers investment products that may invest in the asset class(es) included in this presentation.


Diversification does not assure a profit nor protect against loss.


An investment in the Fund may be subject to risks which include, among others, fluctuations in the value of commodities markets based on economic events and policies, changes in interest rates or inflation rates, changes in monetary and exchange control programs, war, acts of terrorism, natural disasters and technological developments all of which may negatively impact the Fund. The Fund’s subsidiary is not registered under the 1940 Act and is not subject to all the investor protections of the 1940 Act. Thus, the Fund, as an investor in the subsidiary, will not have all the protections offered to investors in registered investment companies. The use of derivatives presents risks different from, and possibly greater than, the risks associated with investing directly in traditional securities.


The Morningstar® Long/Flat CommoditySM Index was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the Market Vectors Long/Flat Commodity ETF and bears no liability with respect to that ETF or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar® Long/Flat CommoditySM Index is a service mark of Morningstar, Inc.


Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Investors cannot invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.


Fund shares are not individually redeemable and will be issued and redeemed at their net asset value (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. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.


Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com/etf. Please read the prospectus and summary prospectus carefully before investing.


No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Securities Corporation. © Van Eck Securities Corporation.


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