A New ETF To Play Global Demand Of Natural Resources

As the demand for natural resources has jumped and is expected to continue to do so due to increased wealth in developing nations and a growing global population, State Street recently launched the SPDR S&P Global Natural Resources ETF (GNR) to enable investors to gain access to the sector.

The new ETF will track the S&P Global Natural Resources Index, which is an index comprised of 90 of the largest publicly traded companies, based on market capitalization, in global natural resources and commodities businesses that meet certain investibility requirements .    Companies that are included in global natural resources include those which are engaged in agriculture, integrated oil and gas, oil and gas drilling, oil and gas exploration and exploration, oil and gas refining, coal and consumable fuels, diversified metals and mining, steel, aluminum, gold and other precious metals. 

As one can see, it is clear that as developing nations continue to grow and per-capita income in these regions of the world grows, consumption and demand for energy and agriculture products and ways to produce these commodities will increase. 

In regards to GNR, the index includes primarily developed market stocks with float-adjusted market capitalization of at least $1 billion.  Furthermore, exposure to US based companies is limited to 40% of the index and exposure to emerging markets is limited to 15% of the index.  Currently, the US constitutes nearly 30% of the index, Canada nearly 13%, the United Kingdom 11% and Australia 8%. 

As for sector allocations, the index’s top three allocations include 28.63% of its assets to integrated oil and gas, 17.48% to chemicals and 15.65% to diversified metals and mining boasting Exxon Mobil (XOM), BHP Billiton (BHP) and Potash Corp Of Saskatchewan Inc (POT) as its top three holdings.   

Lastly, GNR will carry an expense ratio of 0.40% and will be in direct competition with the iShares S&P North American Natural Resources Sector Index Fund (IGE), which is more concentrated on integrated oil and gas companies than GNR and has a heavier concentration of US based holdings.

Disclosure: No Positions

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