Market Vectors, the exchange traded product arm of Van Eck Global, has launched a new exchange traded fund designed to tap into the growing oil and natural gas sector.
The fund, called Market Vectors Unconventional Oil & Gas, will track the Market Vectors Renminbi Bond Index, a rules-based index which covers the overall performance of companies involved in the production of oil and gas using techniques other than the conventional oil well process, like coal bed methane, coal seam gas, shale oil, and tight sands. This includes companies involved in exploration, development, extraction, production and refining.
“As momentum continues to build in this innovative sub-sector of the energy world, companies in this space are poised to lead the way in the discovery and extraction of energy from new and existing sources,” stated Allison Lovett, Van Eck Global’s president of marketing.
The index has, as of January 31, 43 constituents. These include companies that derive a majority of their revenues from unconventional oil and gas, or have properties with the potential to do so. These companies also much have a market cap in excess of $150 million, a three-month average daily trading volume of at least $1 million, and a minimum trading volume of 250,000 shares each month over the preceding six months. It has a gross expense ratio of 62 basis points and a net expense ratio of 54 basis points, which is capped until at least May 1, 2013. It is traded on the NYSE Arca with the ticker symbol MVFRAKTR.
The fund is intended to tap into growing demand for alternative energy investments as rising global consumption forces many countries to develop their own energy independence, according to the firm. This quest is pushing companies to develop a wide variety of unconventional technologies, including hydraulic fracturing, lateral or deep sea drilling and high pressure gas injection.
Market Vectors currently manages 45 ETFs with a total of $23.7 billion in assets. The firm already has a number of other energy-focused funds, such as the Market Vectors Coal ETF, the Market Vectors Solar Energy ETF, and the Market Vectors Global Alternative Energy ETF.