The sharp economic recovery from the depths of the pandemic coupled with continually evolving expectations in terms of future impact have recast the spotlight on natural resources and commodities. While this short-term attention after a prolonged period in the background is a welcome change in sentiment and acceptance, the long-term rationale for investing in natural resource equities and commodities has remained consistent over time. Notably, an allocation to natural resources and commodities can provide unique benefits to investors not only as a tool to help enhance portfolio diversification, but also as a means to gain direct access to global growth and as a hedge to offset the impact of inflation.
Historic fiscal and monetary policy has reignited demand for resources as the global economy reopened. Meanwhile, supply has been constrained from the sharp drop in capital investment over the last several years. In simplified terms, there is more money in the system, increased government and consumer spending, and rising prices through consumption. Plus, less supply of materials and other factors leads to higher input costs. Collectively, these trends establish a sturdy price floor and contribute to increasing evidence of a prolonged inflationary cycle.
Historically, natural resources and commodities broadly have acted as a viable hedge to inflation. This outperformance has also been particularly notable in corresponding periods of positive economic growth.
Resources, Commodities Can Thrive in Inflationary Periods
Source: VanEck, CRSP, FactSet, Bloomberg. Data as of December 2022. Past performance is no indication of future results. Please see additional definitions and index descriptions below.
In addition to the benefits provided broadly by these asset classes, companies—particularly within energy, industrials metals and gold—have healthy balance sheets, attractive valuations and the ability to generate significant free cash.
EV/EBITDA of Global Sectors – 15 Year Range*
Source: VanEck, Bloomberg. Data as of December 2022. *EV/EBITDA = Enterprise Value / Earnings Before Interest, Taxes, Depreciation and Amortization. Energy, Materials, Utilities, Telecom, Healthcare, Consumer Staples, Consumer Discretionary, Industrials and Information Technology represented by respective sector-level indices of the MSCI World Index (note: Real Estate and Financials are excluded due to data availability).
Many companies also exhibit what we view as fascinating longer term growth profiles as direct inputs and beneficiaries of the investment output needed for the resource transition movement fueled by technological advances and new, increased applications of metals and minerals.
Minerals Used in Clean Energy Technologies
Source: IEA. Data as of May 2021.
VanEck Natural Resources and Commodities Solutions
VanEck has a history of investing in natural resources and commodities for over 50 years, offering investors actively and passively managed strategies, from physical commodities to natural resource equities. We offer specialized exposure to individual sectors and diversified solutions with broad exposure across sectors and industries.
More information including recent performance and current holdings can be found by clicking the fund names below:
Global Resources Fund
Actively-managed approach to companies with unique competitive advantages associated with traditional commodities and those leading the development of emerging resource applications and technologies.
International Investors Gold Fund
Proven fundamental, bottom-up process emphasizes stock selection based on industry experience to access opportunities across the gold mining sector.
CM Commodity Index Fund
A passively managed fund that offers diversified commodities exposure by spreading its exposure across multiple maturities and maintaining a constant maturity per commodity to mitigate the impact of negative roll yield.
CMCI Commodity Strategy ETF
A passively managed ETF that spreads its exposure across multiple maturities to offer diversified exposure and mitigates the impact of negative roll yield by maintaining a constant maturity per commodity.
VanEck Oil Refiners ETF (CRAK)
Provides exposure to an industry that may generally benefit from lower oil prices, a segment that has historically interacted differently with oil prices and market dynamics than other energy segments.
VanEck Energy Income ETF (EINC)
Offers exposure to MLPs and energy infrastructure companies that have historically exhibited attractive yield characteristics without burdensome K-1 tax reporting.
VanEck Gold Miners ETF (GDX)
The nation’s first ETF that offers direct exposure to the gold mining industry, which may provide leverage to rising gold prices.
VanEck Junior Gold Miners ETF (GDXJ)
Access to junior gold miners, including smaller exploratory or early development phase companies that are responsible for many gold reserve discoveries worldwide.
Green Metals ETF (GMET)
Capture companies involved in the production of the metals that enable the energy transition from fossil fuels to cleaner energy sources and technologies.
VanEck Natural Resources ETF (HAP)
Offers exposure to global companies involved in six natural resources segments (including agriculture, energy, metals and renewable energy).
VanEck Agribusiness ETF (MOO)
Positioned to meet growing demand as global population growth is driving increasing food demand and the need for efficient agricultural solutions.
VanEck Uranium+Nuclear Energy ETF (NLR)
Access to an important segment of the nuclear energy market, which is a significant clean energy source at an inflection point from increasing demand.
VanEck Oil Services ETF (OIH)
Invests in highly liquid companies in oil services industry, including both domestic and U.S. listed foreign companies allowing for enhanced industry representation.
VanEck Merk Gold Trust (OUNZ)
Provides investors with a convenient and cost-efficient way to invest in gold through shares with the option to take physical delivery.
VanEck Inflation Allocation ETF (RAAX)
Comprehensive allocation strategy that invests across real assets and seeks to reduce volatility by responding to changing market environments.
VanEck Rare Earth/Strategic Metals ETF (REMX)
Provides access to the rare earth or strategic metals industry, which supplies key inputs to many of the world’s most advanced technologies.
VanEck Steel ETF (SLX)
Access to the steel industry, an industry supporting global industrialization and economic expansion.
VanEck Low Carbon Energy ETF (SMOG)
Exposure to low carbon energy that includes not only solar, wind and hydro companies, but also in more recently developing areas of the market such as electric vehicles, battery tech, hydrogen and fuel cells.
Future of Food ETF (YUMY)
Actively-managed ETF that invests in companies engaged in the technology behind the new environmentally sustainable agriculture and food products and services.
VanEck Commodity Strategy ETF (PIT)
Actively managed exposure to a broad basket of commodity futures.
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