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Largest gold mining ETFs arrive in UCITS form in Europe


Van Eck Global Investments Ltd., the Irish management company of the Market Vectors UCITS ETFs, has launched its first European ETFs, the Market Vectors Gold Miners UCITS ETF (GDX) and Market Vectors Junior Gold Miners UCITS ETF (GDXJ) which are based on the global gold mining equity market.

These ETFs invest in gold mining stocks and mirror the strategy of their US-listed counterparts which are the biggest gold mining ETFs in the world. Lars Hamich, Chief Executive Officer of Van Eck Global (Europe) and Market Vectors Index Solutions explains that the US version of GDX has some USD7 billion under management while the GDXJ fund has USD2 billion.
“What we wanted to do was come to the market with a story” Hamich says. In terms of size, gold equity mining in Europe is a fairly small sector with low liquidity but Van Eck  had identified investors who were already using their US funds.
“Out of the USD9 billion we have in our gold mining funds” Hamich says “about USD3 to 3.5 billion is from non-US sources, with about USD2.5 from Europe and the rest from South American and Asian clients.”
In addition to the listing on the London Stock Exchange and the registration for public distribution in the United Kingdom, the ETFs are registered for public distribution in Finland, Germany, Ireland, Norway, Sweden, the Netherlands, and Spain.
GDX and GDXJ are pure-play ETFs with a global focus. Tracking the performance of the NYSE Arca Gold Miners Index (GDMNTR), GDX provides exposure to a comprehensive portfolio of large, mid-sized and small global gold mining companies. GDXJ is benchmarked to the Market Vectors Global Juniors Gold Miners Index (MVGDXJTR). This ETF invests in micro-, small- and medium-capitalisation mining companies, many of them so-called ‘early stage’ companies which are in an exploratory or early development stage.
Because this is the first European UCITS gold mining equity ETF with a US version, Hamich believes that European afternoon trading sessions will benefit from the American funds liquidity. “None of the other European funds have that benefit because they don’t have the US counterpart” he says. “The real selling point is that we are benefiting from the US products in terms of size and liquidity which will result in pretty tight spreads.”
Gold charts compare gold mining equity and gold bullion and find that the ratio is lower than at any point in the last 25 years. “At current pricing gold mining stock s are pretty cheap” Hamich says. “Independent commentators are bullish in gold mining equity at the moment.”
Potential investors include institutional investors such as pension funds, hedge funds and private banks.  It was the arrival of AIFMD which drove the Van Eck Global to launch a UCITS version of their fund which expands the routes to the underlying investments available for global investors. The firm has been in Europe since 2008. “People have a choice now” Hamich says. “The gold story is simple – you don’t have to explain what a gold mining equity is and ETFs are simple. We are just offering a new version of the product. This is the door opener, we won’t stop with these products; we will be doing more shortly.”

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