Popular Gold Miner ETF To Change Dramatically

April 17, 2017

Earlier this week, ETF.com reported that the VanEck Vectors Junior Gold Miners ETF (GDXJ) may have become too big for its index, the MVIS Global Junior Gold Miners Index. The $5.4 billion exchange-traded fund owns giant positions in its underlying holdings, putting it at risk of violating certain Canadian and U.S. regulatory thresholds.

To avoid crossing those thresholds, the ETF bought up stocks of companies that aren't in its index―creating a significant divergence between the ETF components and the index components. On Thursday, VanEck (which runs both the ETF and index) acknowledged the divergence by announcing it would broaden the scope of the index and include many more gold miner stocks in the portfolio at the next rebalance date.

Dramatic Transformation For GDXJ

According to a press release from the firm, starting on June 17, "companies ranking between 60% and 98% (currently: between 80% and 98%) of the full market capitalization [of the investable gold miner universe] qualify for inclusion in the MVIS Global Junior Gold Miners Index."

Translated into market-capitalization terms, that means the market-cap range for new index components may expand from $75 million - $1.6 billion to $75 million - $2.9 billion, according to a Scotiabank report published on Thursday.

The changes to the index will result in a dramatic transformation of GDXJ's portfolio. Scotiabank estimates that, after the changes, there could be 23 new additions to the index (four of which are already in the ETF). Those 23 new additions could represent 60.8% of the new index portfolio.
 

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