The natural resources fund breaks through the $1-billion-in-assets milestone.
The FlexShares Morningstar Global Upstream Natural Resources ETF (NYSEArca: GUNR) saw its total assets break above $1 billion this week—just over a year after its inception—in a testament to investors’ growing appetite for risk exposure.
On Thursday, net inflows of $369.5 million that helped push the ETF above the $1-billlion-in-assets mark, was said to be due to new institutional investor interest. All in all, GUNR, which now has $1.29 billion in assets, has attracted net inflows of more than $483 million since the beginning of the year.
Behind the momentum is growing investor demand for riskier assets in the form of commodities and natural resources after having shunned the segment for much of last year, Northern Trust’s Global Head of ETFs Shundrawn Thomas told IndexUniverse.
“A lot of people were looking at portfolio reallocations in December and this month,” Thomas said. “These people on the margins were poised to put some risk assets back to work. We were looking for these reallocations to happen, so this is a bit of a ‘January effect’.”
Still, appetite for risk isn’t the only reason GUNR is resonating with investors and advisors alike; performance relative to its peers is another, Thomas said. Indeed, the fund’s broad approach has so far paid off for investors looking to tap into commodities via equities instead.
GUNR, which first came to market in late 2011, has staged an “impressive” run, with returns of some 17.8 percent since inception, “outperforming competitors in the space during this time frame,” Paul Weisbruch, of Street One Financial, told IndexUniverse.
“Even in an environment without strong flows into commodities funds like we saw much of last year, GUNR has done well,” Thomas added.
The fund is one of the broadest equities-linked commodities ETF in the market today, as it invests in firms in both emerging and developed economies that are involved in the ownership, management or production of natural resources such as energy, agriculture and metals.
That diversification stands out in the face of some of its competitors, which serve up narrower exposure, such as the Market Vectors Agribusiness ETF (NYSEArca: MOO) and the Market Vectors RVE Hard Assets Producers ETF (NYSEArca: HAP). GUNR's main competition in the space, however, is the IndexIQ Global Resources ETF (NYSEArca: GRES), which is also a broadly diversified fund that provides global exposure to companies involved in the segment. GRES, which came to market in late 2009, has just under $100 million in assets.
“This is a great example of an under-recognized, under-appreciated fund, gaining significant traction and market share after some seasoning,” Weisbruch said.
“As with many ETFs, portfolio managers—especially on an institutional level—generally will wait until a newer ETF has some seasoning behind it in terms of real live track record, as well as exhibited trading volume and real assets under management,” added Weisbruch.
“At this juncture, GUNR basically has all three of these satisfied, so we would imagine similar portfolio allocations/inflows will be likely in the near term across the institutional ETF landscape,” he continued.