Uranium is mostly known to investors for its use in nuclear weapons and its failure to live up to its potential as an alternative energy source. But now investors have another reason to learn about it: ETFs.
The United States is getting its first uranium ETF this week, thanks to the hard work of a startup index provider called North Shore Indices. The North Shore Global Uranium Mining ETF (URNM), which lists this week, buys global companies involved in uranium exploration, mining and production.
Uranium companies are identified using proprietary research, which includes lots of reading of corporate documents – but also meetings with management.
Companies that qualify for the index are market weighted, with weights capped at 15%. The fund is managed by Exchange Traded Concepts, the white labeller.
Analysis – ticker should be NUKE, BOMB or NRGY
We have ETFs for many kinds of obscure metals – palladium, rhodium, platinum. But whereas most metals ETFs are either futures-backed or physically-backed, today’s listing buys shares. This decision is almost certainly for the best.
Regulators don’t allow financial institutions to hoard industrial metals for ETFs. Hence there are no physical copper or physical zinc ETFs. (They don’t want them taken out of the supply cycle). And hence one suspects there will never be a physical uranium ETF. Meanwhile, uranium futures – the other route, potentially – are almost always in contango due to storage costs.
Global X already has a uranium and nuclear ETF (URA), which holds $180 million in assets and has delivered an abysmal -14% average return the past 5 years. However, today’s listing is the first to target purely uranium. It will be interesting to see how it goes.