ProShares, which manages 136 exchange-traded funds, is taking aim at increasing battery demand with a new ETF that invests in companies that mine metals crucial to the energy storage industry.
The ProShares S&P Global Core Battery Metals ETF (ION) invests in companies supplying lithium, cobalt and nickel, used in lithium-ion batteries that power electric vehicles, phones and a growing range of products. The fund tracks the S&P Global Core Battery Metals Index, which includes 41 companies in 17 countries. Australian and Chinese firms make up more than a third of the portfolio’s weighting.
Bethesda, Maryland-based ProShares, which manages more than $60 billion in assets, said the fund is the first to invest specifically in companies mining battery materials.
“Global demand for lithium-ion batteries is soaring,” ProShares’ Global Investment Strategist Simeon Hyman told ETF.com. Companies mining battery metals are attractive since they own the direct rights to the resources, which is “a powerful position considering the trajectory of demand,” he added.
Battery demand is being pushed higher by the growing sales of electric vehicles, consumer electronics and more. Electric vehicles are selling faster than their gas-powered counterparts, according to an October Electrek report, which said EVs now make up 6% of U.S. car sales. Battery manufacturing plants are cropping up, with 30 planned in Europe, according to McKinsey and 13 in the U.S., Electrek said in December.
Hyman also added that companies in ION’s index have historically demonstrated growing revenues and profits, and have operated with “attractive” margins. ProShares opted to invest directly in equities of mining companies instead of commodity futures due to the high regulatory and capital investment hurdles the latter poses on investors.
Commodity futures contracts expire each month, forcing any ETF that holds front-month futures to roll their positions into later-dated contracts. This means they run the risk of being more expensive to investors.
ION lists on the NYSE Arca and comes with an expense ratio of 0.58%.
Contact Zoya Mirza at [email protected]