Perth, Western Australia-based Optica Capital has announced the launch of its first ETF, the Rare Earths and Critical Materials ETF (NYSE: CRIT).
The firm writes that tracking the EQM Rare Earths and Critical Materials Index (CRITNTR), CRIT features many of the minerals and materials deemed by governments worldwide as being critical to their economic and national security. Optica writes that the ETF will give investors access to growth companies that produce these critical materials, including minerals and metals that are essential in many consumer and industrial sectors. These materials are used in the manufacturing of green energy products such as electric vehicles, solar panels and wind turbines; global communications technology, including satellites, smartphones and computers; and national defence tools such as submarines and fighter jets.
“When it came to powering the planet, the 19th century was the century of coal and the 20th century was the century of oil,” says Jerry Hicks, CEO of Optical Capital. “We believe the transition to more environmentally positive measures and the vital input of certain elements means that the 21st century will undoubtedly be the century of green energy, underpinned by rare earths and critical materials. This position is the foundation of the CRIT ETF.”
The Fund is born from a recently updated United States Department of the Interior list identifying certain minerals and metals as critical to the economy, citizen well-being and national security. Optica Capital also examined similar lists from governments in the European Union, Canada and Australia.
Hicks adds: “In recent weeks we have seen how vital and fragile commodity supply chains are to countries. For example, due to recent world events, the price of nickel has risen sharply and the strategic supply of rare earths has become a major topic of concern.”
The Fund also highlights the importance of the supply chain process involving rare earths and critical materials that make up some of the world’s most desired products.
“One example is electric vehicles, which have risen in popularity across the globe,” says Derek Bone, chairman of Optica Capital. “We are aiming to highlight the gaps between increasing demand and deepening shortages of the critical supply of minerals and metals like rare earths, copper, lithium and cobalt, which are heavily relied upon in the EV and battery production process. Considering that it usually takes over 10 years from the announcement of discovery to add new minerals and metals into the supply chain, we have an excellent theme for exposure to growth opportunities.”
CRIT is made up of approximately 51 companies that meet standards for the development, production and use of rare earths and critical materials. The Optica team chose companies that align with the rules of the Fund’s passive investment strategy. The Fund seeks to withstand market volatility and to have a long-term presence in portfolios. Additionally, the companies making up the ETF share a common theme of supporting the worldwide “green energy” movement.
“Gen X and millennials are major drivers of the world economy,” says Ross Denford, director of funds management at Optica Capital. “These generations were the first to support in large numbers the theme of ‘going green.’ We identified the trends and volume behind the movement.”