Elementum Physical Electric Vehicle Metals ETC

Elementum Physical Electric Vehicle Metals ETC

One of the lowest-priced physically backed Index ETCs on the market today.

  • Total Expense Ratio of 0.80%

  • Physically backed with allocated metal in vaults or warehouses

  • Ownership tracked with Distributed Ledger Technology

What is the index underlying the GPF Physical Electric Vehicle Metals ETC?

The IEA estimates that the number of Electric Vehicles (EVs) needs to grow to 350m by 2030 and 2 bn by 2050 from 11m in 2020 which is equivalent to a 40% compounded annual growth rate for the first decade followed by a 20% compounded annual growth rate for the second decade.

The GPF Physical Electric Vehicle Metals ETC tracks the Solactive GPF Electric Vehicle Index. The index, is a basket of the key clean energy transition metals used in electric vehicles including battery EVs, plug-in EVs, hybrid EVs and Fuel Cell EVs. The ETC provides investors an opportunity to participate in the phenomenal expected future growth of the EV industry without betting on specific companies and provides investors exposure to the performance of the following 5 metals through one investment:

  • Nickel

  • Copper

  • Cobalt

  • Platinum

  • Palladium

How would the ETC look in a 60/40 portfolio?

Whilst the Solactive GPF Electric Vehicle Index has a higher volatility than equity markets, its correlation to equities and other asset classes is very low with a correlation of 0.26 to the MSCI World and 0.31 to EM equities over the last 5 years. Given its comparable equity returns and lower correlation, adding the index to a 60/40 Equity/Bond portfolio is very attractive and improves the risk/return characteristics of the portfolio. These attractive features means that an optimizers attempt to maximize the allocation to the index and left unconstrained would allocate up to 60% to it.

How the GPF Physical Electric Vehicle Metals ETC created?

The ETC tracks an independently managed and calculated benchmark index (Solactive GPF Electric Vehicle Index). The index is created based on the intensity of the key metals per type of vehicle and the production forecasts for each type of vehicle. Hard-to-source metals are excluded from the index. The weight of each metal in the index is then determined by its value as ratio of the total value of all the key metals. The index is then adjusted by capping the maximum weight of a single metal at 40%. The constituent weights will then be reassessed and reweighted (including additions/deletions) on an annual basis and will remain fixed for the remainder of the year.

Why the GPF Physical Electric Vehicle Metals ETC?

A basket of metals allows investors the convenience of gaining access and exposure to numerous metals through one investment. It is also an efficient and simple method of gaining exposure to an attractive market trend without having to continuously manage any index weighting changes. Whilst there are EV basket ETFs in the market which provide exposure to companies in the EV space, the GPF Physical Electric Vehicle Metals ETC is the only ETC providing direct exposure to the physical metals critical to the EV industry. Importantly, the GPF Metals ETC is not seen as a replacement for EV ETFs but more of a compliment. Intuitively, EV companies are inversely exposed to the key metals and an EV ETF is likely to sell-off in an environment of rising metal prices. By adding exposure to an EV ETC, an investor of EV ETFs will effectively hedge their ETF against rising cost pressures.