Van Eck, the ETF provider behind the Market Vectors ETFs, is changing indexes on two of its sector-focused equities ETFs to in-house benchmarks in a move the company says will improve liquidity and diversification of the two funds.
The $5.79 billion Market Vectors Agribusiness ETF (NYSEArca: MOO) will begin tracking the Market Vectors Global Agribusiness Index, replacing the DAXglobal index. Similarly, the Market Vectors Solar Energy ETF (NYSEArca: KWT) will switch to a Market Vectors benchmark, replacing an Ardour index.
The index changes will lift to about 25 the number of its equities ETFs that use in-house indexes, leaving 10 funds with benchmarks from third-party index providers. The company currently has a roster of 35 equity funds.
Van Eck first acquired the indexes that bear that same Market Vectors name from Germany-based 4asset-management in November 2011. That marked Van Eck’s commitment to moving toward self-indexing in a move that resulted in the creation of Market Vectors Index Solutions, a wholly owned Germany-based Van Eck subsidiary that develops and publishes all Market Vectors indexes.
The company estimates that some $8.7 billion in assets today are linked to ETFs tied to Market Vectors benchmarks.
Focus On Liquidity And Diversification
The proprietary indexes that will be anchoring MOO and KWT are each rules-based, modified market-capitalization-weighted float-adjusted indexes that apply liquidity screens as well as weighting caps to enhance diversification.
“We expect that MOO will become more diversified as a result of these changes,” Brandon Rakszawski, marketing product manager at Market Vectors, said in a press release.
“Constituent capping will continue to help avoid overconcentration in a few large holdings and the pure-play nature of the index will allow MOO to offer truly representative exposure to the agribusiness industry,” he said.
The $5.79 billion MOO, launched in August 2007, currently tracks the DAXglobal Agribusiness Index, a modified market-capitalization-weighted index that invests in companies that derive at least half their revenues from agriculture. The new Market Vectors index also requires that at least 50 percent of a constituent’s revenue come from agribusiness.
The 53-security portfolio currently includes the likes of Monsanto, Syngenta and Deere & Co., with more than 85 percent of the portfolio tied to large-cap companies with a market capitalization of more than $5 billion.
MOO currently allocates nearly 37 percent of its portfolio to U.S.-based names. Canada comes in second, with a 13 percent stake.
KWT’s Broader Scope
KWT will track the Market Vectors Global Solar Energy Index, which comprises companies that derive at least 50 percent of their revenue from the solar energy industry. That requirement broadens KWT’s investable universe given that its current benchmark—the Ardour Solar Energy Index—requires eligible securities to derive a minimum of two-thirds of their revenue from solar energy.
Adding to the fund’s diversity is a cap limit on the weight of any single stock at 8 percent, the latest filing said. Securities are weighted by free-float market capitalization.
The $12.6 million KWT, launched in April 2008, currently allocates nearly half its portfolio to U.S. companies, with China representing just under 30 percent of the fund’s country exposure. More than 85 percent of the mix of about 25 names consists of companies with market capitalization of under $1 billion.