VanEck Vectors ETFs
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In 2016’s third quarter, the hard assets strategy’s positions in Energy and Diversified Metals & Mining sectors were, in particular, significant contributors to positive performance. Within the Energy sector, positive performance stemmed mainly from the Oil & Gas Exploration & Production sub-industry. In a reversal from the second quarter when it was the strongest performing sub-industry, in the third quarter, Gold was the largest detractor from Fund performance.
Despite the continuing uncertainties in the market surrounding the U.S. presidential elections, and in the face of moderating global GDP growth, sentiment remained on the positive side and demand for commodities remained remarkably resilient. As in the second quarter of the year, the most significant macroeconomic factor influencing the strategy was the extraordinary accommodation extended by central banks around the world which continues to add support for economic growth and demand for commodities.
In the fourth quarter, we see the macro drivers continuing to be central bank policy and the ramifications of the forthcoming presidential election in the U.S. Despite concerns about global growth, there is still firm demand for commodities and healthy consumption. On the supply side, we continue to see the effects from the lack of investment and capital expenditure reductions over the past several years.
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Charl Malan, Senior Analyst, explains that the diversified metals and mining industry has shifted focus from volume to profits, which he believes may lead to strong performance in 2016 and beyond.
Shawn Reynolds, Portfolio Manager, explains why he expects restricted supply and greater efficiencies in the oil industry going forward due to cyclical and structural developments.
Shawn Reynolds, Portfolio Manager, predicts demand resilience will help oil prices rebound further.
Portfolio Manager and Strategist
Roland Morris, Portfolio Manager and Strategist, gives his commodity outlook for the second half of 2016. Continued supply response and the Fed maintaining an accommodative policy will continue to provide support for commodities.
Portfolio Manager, Natural Resources Equity
Shawn Reynolds, Portfolio Manager, Natural Resources Equity, discusses the short-term and long-term implications of cuts to oil supply in 2016 and beyond.
“We’re still working on the assessment and appraisal of where all these resources are. As the years go on, we've got hundreds and thousands of wells to drill into these shales and unconventional resources that will be more manufacturing-oriented.”
“Hidden behind the scenes is a very serious supply response to low prices occurring across several industries and sectors, especially the energy and industrial mining sectors.”
"The majors are still stuck in the old model, trying to drill in deep water in megaprojects, which we are now finding out don't work and didn't work with oil at $100 a barrel. While the independent E&P companies are now showing that they can be successful, drill great wells, and grow with oil at $30 a barrel."
"Refiners differ quite a bit relative to many other sub-industries or other companies in the energy industry in that they are not entirely dependent on oil prices for their gains or losses."
“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.
1Expenses are calculated for the 12-month period ending 05/01/16: Class A: Gross 1.36% and Net 1.36%; Class C: Gross 2.16% and Net 2.16%; Class I: Gross 1.04% and Net 1.00%; and Class Y: Gross 1.15% and Net 1.13%. Expenses are capped contractually through 05/01/17 at 1.38% for Class A; 2.20% for Class C; 1.00% for Class I; and 1.13% for Class Y. Caps exclude certain expenses, such as interest.
2The S&P North American Natural Resources Sector (SPGINRTR) Index (the "Index") provides investors with a benchmark that represents U.S. traded securities that are classified under the GICS® energy and materials sector excluding the chemicals industry; and steel sub-industry. The MSCI ACWI Commodity Producers Index captures the global opportunity set of commodity producers in the energy, metal and agricultural sectors. 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 VanEck. 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.