The newest fund from VanEck attempts to provide exposure to real assets while managing downside risk. The VanEck Vectors Real Asset Allocation ETF (RAAX) is actively managed and invests primarily in other ETFs.
RAAX comes with an expense ratio of 0.74% and lists on the NYSE Arca. The fund can invest in equities, fixed-income securities, physical assets and exchange-traded products that provide exposure to real assets, including commodities, real estate, natural resources and infrastructure.
Part of the fund’s goal is to maximize what the prospectus terms “real returns,” but it can also allocate as much as 100% of the portfolio to cash or cash equivalents if its managers deem the risk in the market to be great enough.
‘Real-Asset Investment Solution’
“These are predominantly cyclical sectors that experience frequent periods of high volatility. RAAX was specifically designed to address this,” said RAAX’s portfolio manager David Schassler. “It is a real asset investment solution with built-in risk management.”
The fund’s decisions are largely governed by its Real Asset Model, which uses technical, macroeconomic and sentiment indicators ranging from price trends and volatility to macroeconomic supply-and-demand data to determine the asset allocation of the fund, the prospectus says.
The ETF’s structure includes a wholly owned Cayman Islands subsidiary that can represent up to 25% of the fund’s entire portfolio. The subsidiary is mainly included to hold the securities associated with commodities in a tax-advantaged manner.
RAAX is very similar to the $11 million FlexShares Real Assets Allocation Index Fund (ASET), which also invests in other ETFs but is passively managed. The fund, which rolled out in 2015, comes with an expense ratio of 0.57%. However, it allocates among three different FlexShares funds, while RAAX, when not invested in cash, can allocate among roughly one dozen other ETFs.
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