[This article appears in our August 2019 issue of ETF Report.]
Like a lot of industries, gold miners have had a bumpy but pretty dramatic rise this year, with most of the ETFs in the category outperforming the SPDR S&P 500 ETF Trust (SPY) during the first half of the year through July 10.
The VanEck Vectors Gold Miners ETF (GDX) is basically the granddaddy of the space, with more than $10 billion in assets under management (AUM). It launched in May 2006, well before any of the other gold miners ETFs.
GDX, the largest ETF in issuer VanEck’s offering, has a somewhat complicated history. In 2013, according to FactSet, it transitioned from a U.S. fund to a globally focused one, and it allowed a wider swath of companies to join in other respects.
|Ticker||Fund||Inception||Exp Ratio||AUM||Spread||No. Of Holdings|
|GDX||VanEck Vectors Gold Miners ETF||5/16/2006||0.52%||$10.33B||0.04%||45|
|GDXJ||VanEck Vectors Junior Gold Miners ETF||11/11/2009||0.53%||$4.06B||0.03%||71|
|RING||iShares MSCI Global Gold Miners ETF||1/31/2012||0.39%||$241.37M||0.13%||37|
|SGDM||Sprott Gold Miners ETF||7/15/2014||0.57%||$170.04M||0.35%||27|
|SGDJ||Sprott Junior Gold Miners ETF||3/31/2015||0.57%||$59.46M||0.34%||33|
|GOEX||Global X Gold Explorers ETF||11/3/2010||0.65%||$39.10M||1.40%||51|
|GOAU||U.S. Global GO Gold and Precious Metal Miners ETF||6/27/2017||0.60%||$14.86M||0.62%||30|
Source: FactSet, 7/5/2019
More Than Gold
That eliminated requirements around the hedging of gold exposure. It also isn’t strictly a pure play on gold miners, allowing companies that mine other precious metals into the index.
However, that diversification appears to have helped it. The fund has exhibited solid performance over the longer term, and in the very short term, has been beating most of its peers.
Despite this, it’s seen outflows through June 30 of nearly $2 billion, while most of the other funds in the space have seen small inflows.
It has the second-lowest expense ratio of any of its competitors, charging a 0.52% a year, which is appealing to long-term investors. GDX’s liquidity is solid, making it a great trading tool, with a trading spread of just 0.04% and an average daily dollar volume of more than $925 million.
Inverse & Leveraged Plays
GDX also has three leveraged or inverse ETFs tied to its underlying index, meaning there’s a full suite of funds that investors with strong convictions can use to make bets on a very specific exposure.
Direxion offers the Direxion Daily Gold Miners Index Bull 3X Shares (NUGT) and the Direxion Daily Gold Miners Index Bear 3X Shares (DUST), both of which are sizable, with assets of $1.3 billion and nearly $300 million, respectively, while ProShares offers the $16 million ProShares Ultra Gold Miners (GDXX).
The VanEck Vectors Junior Gold Miners ETF (GDXJ) is both the second-oldest and second-largest of the gold miners ETFs. Having launched in November 2009, with current assets of $4.1 billion, GDXJ is the third cheapest, at an annual expense ratio of 0.53%, with an even narrower trading spread than GDX, at 0.03%. Its average daily dollar volume is $425 million.
Profound Index Change
GDXJ is not without controversy, as, in June 2017, it made dramatic changes to its index that broadened the benchmark’s exposure to include larger cap gold miner stocks to avoid running up against U.S. and Canadian regulatory ownership thresholds. The fund was simply getting too big for its index.
TD Securities dramatically labeled the change the "single greatest wealth destruction event in index history." These dire predictions don’t appear to have come true, and it’s mostly kept pace with its direct competitor, the $61 million Sprott Junior Gold Miners ETF (SGDJ).
SGDJ has a weighted average market capitalization of $1.3 billion versus $2.3 billion for GDXJ. That seems like a big difference, but keep in mind that the weighted average market cap for GDX is $10.8 billion.
GDXJ has 71 holdings in its portfolio, far and away the most of any of the ETFs in this comparison. Its big brother GDX by comparison has 45 holdings, while SGDJ has 33.
Other Golden Archways
The iShares MSCI Global Gold Miners ETF (RING) is the third-biggest fund in the bunch, with $248 million in assets, but it’s also by far the cheapest fund, with an annual expense ratio of 0.39%.
RING tilts even further toward large caps than GDX, with a weighted average market cap of $12.4 billion, and a portfolio that includes 37 holdings. It’s a pure-play fund, with 90% of its portfolio devoted to companies that primarily mine gold. The rest is diversified across other metals, according to FactSet, which also noted it has a significant concentration in its largest names.
Interestingly, there are many similarities between its portfolio GDX’s. In fact, the top three components for both funds are the same: Newmont Goldcorp, Barrick Gold and Newcrest Mining.
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
At its current size, the fund isn’t at risk for closure. Plus, RING carries the prestigious iShares brand name. The liquidity is strong, with a spread of 0.13% and an average daily dollar volume of $3.6 million, though its volumes are nowhere near those of GDX and GDXJ.
What would probably make investors—especially traders—take notice is RING’s performance. It’s the top performer over the rest of the funds in the group during the three-month, year-to-date and one-year time periods, and ranks near the top of the category for three- and five-year annualized returns.
RING also saw the most (though still modest) inflows of the gold miners ETFs, pulling in $12 million.
For a larger view, please click on the image above.
The Sprott Gold Miners ETF (SGDM) takes a smart beta spin on spreads in the space, selecting stocks based on how high their beta is relative to gold’s spot price, and weighting them by market cap within tiers that are determined by revenue growth and debt-to-equity ratios. It has some exposure to silver miners, but caps that exposure at 20%, according to FactSet.
SGDJ similarly focuses on both gold and silver miners—but in the small cap space—and uses a modified market cap approach that tilts weights based on revenue growth and price momentum. Both funds come with an expense ratio of 0.57%, which is at the upper end of the spectrum. SGDM has a healthy market cap of $172 million, while SGDJ has $61 million in AUM.
Both portfolios tilt heavily to Canada, with the country representing more than 79% of the large cap fund and more than 91% of the small cap product.
|Ticker||1 Mo||3 Mos||YTD||1 Yr||3 Yrs||5 Yrs||10 Yrs|
Source: FactSet; data as of 7/10/2019. 3-, 5- and 10-year returns annualized
Traders and long-term investors should be comfortable with both of the VanEck funds given their size, expense ratios, track records and liquidity.
However, RING is a perfectly acceptable fund, and could have more appeal to long-term investors given that it’s cheaper than GDX by 0.13%.
Contact Heather Bell at [email protected]