Going Metal: ETF Mining Opportunities in EV Materials

September 07, 2022

Invesco earlier this year bet on electric vehicles, without investing in household names like Tesla Inc. or Ford Motor Company. Invesco Commodities Strategist Kathy Kriskey discusses the Invesco Electric Vehicles Metals Commodity (EVMT), which bets on rising demand for the materials used to build EVs, especially the batteries. 

Kriskey recently spoke with ETF.com Editor-in-Chief Sean Allocca and Managing Editor Heather Bell about the new ETF, which has lost 30% since it launched on April 27, more than the 7.3% decline in the S&P 500. It currently has $18.7 million in assets under management, according to ETF.com data. 

EVs all require certain metals—cobalt, nickel, copper, aluminum, lithium—and with sales of such vehicles growing, Invesco chose to create an ETF focused on those commodities, Kriskey said, noting that more traditional investors might choose to buy shares of manufacturers or battery makers. Electric vehicle sales doubled worldwide last year to 6.6 million, and were on track to easily top that figure this year, the International Energy Agency reported in May.  

“It was really important for us to say to those investors, we get it; we understand why you believe in this sector, because a lot of things are pointing to this big move to decarbonize,” she said. “This is important, to actually access those metals, those components that are going into these electric vehicles.” 

Beating the Index 

The ETF, whose prospectus lists Peter Hubbard, David Hemming and Theodore Samulowitz as managers, is designed to perform better than the S&P GSCI Electric Vehicle Metals Index, Kriskey said. They’ll do this by tweaking the weightings of commodities in the index, which include nickel, copper, aluminum, cobalt and iron ore. 

“They can also go further out the Commodity Futures curves. So a lot of people who invest in commodities will know those phrases like 'contango' and 'backwardation,' but these commodities have forward curves,” she said. “They will be looking at those forward curves and factoring in some of the fundamental analysis, but also liquidity to try and figure out where to be along this curve to try and produce some alpha.” 

China 

While EVMT is not off to a stellar start, EV metals have plenty of reasons to attract investors, she said. China, the world’s biggest user of EVs and the biggest commodities buyer, tops of the list. COVID-19 lockdowns that crimped sales of the metals will eventually lift, and that should spark demand, Kriskey explained. 

“At some point, China will be reopening. So that's why we really wanted to talk about this product, because we see this potentially as a great buying opportunity in this sector,” she added. “You want to buy something when it's not expensive. And that's what it looks like right now for the sum of these components.” 

 

Contact Ron Day at [email protected] 

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