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Investment Profile

Raw Earth: The Nitty Gritty of a Natural Resources ETF

  • Raw Earth provides investors with exposure to the international natural resources markets
  • The fund is composed of stocks from energy, agribusiness, and extraction companies
  • The natural resource market is volatile and can be risky
3 min read

The business of natural resources can be dirty. The mining, agricultural, and fossil fuel industries require lots of resources of their own to extract, grow, and refine all of the products we use every day, from shampoo to trash bags, to cosmetics to produce.

Although we know that many of the products derived from these industries contribute to climate change, we’re still largely dependent upon them to satisfy humanity’s energy and manufacturing needs, and to feed the world’s population.

And with roughly 7.5 billion people on the planet — almost all of whom rely on these industries at some level — they aren’t going to disappear overnight. For investors, that means that natural resources can be a money maker, and a relatively stable one.

You can invest in natural resources too, with the Raw Earth (ticker: GNR) exchange-traded fund on Stash.

What’s in the fund?

Raw Earth is Stash’s name for the SPDR S&P Global Natural Resources ETF, which tracks the S&P Global Natural Resources Index.

Raw Earth provides a simple way for investors to gain exposure to the global natural resources market. The fund mainly invests in three key industries: Energy companies, agribusiness companies, and mining companies.

The fund’s biggest holdings include big oil companies including Chevron, Exxon Mobil,  and Royal Dutch Shell, it also includes agriculture and biotech company Monsanto, fertilizer company Nutrien, and forest-based products company UPM Kymmene Oyj, according to the fund prospectus.

The basic materials sector represents more than half of the fund and includes agribusiness and mining companies. The energy sector makes up nearly 39% of the holdings.

The companies the fund invests in are geographically diverse, with roughly one-third of the holdings U.S.-based, 16.7% in the U.K., and 10.9% in Australia. The stock of companies based in Canada, Finland, Brazil, and Japan are also in the fund.

Performance

The fund is managed by State Street Global Advisors, and it launched in 2010.

Raw Earth lets you invest in the global natural resources market. It’s important to note, however, that this investment can be volatile because of the strong influences international economies, politics, and environmental changes play. The energy sector, which makes up a large portion of the fund is also known for its volatility. So, if you choose to invest in Raw Earth, it might be smart to make it part of a diversified portfolio.

Year-to-date, the fund is down 0.92%. But in 2017, it returned 22.63%, and in 2016, 30.84%. Contrast that, however, with 2014 and 2015, when the fund was down -10.38% and -24.12% respectively, according to Morningstar.

But the recent upswing is likely associated with the election of President Donald Trump in 2016, who has been supportive of the fossil fuel industry.

Similar funds

There are many funds that invest in natural resources, and most of them have followed comparable trajectories over the years.

A similar fund, the iShares North American Natural Resources ETF (ticker: IGE), is more concentrated in the energy sector, and nearly all of its holdings are based in the U.S. and Canada.

IGE, however, has a loss of -6.19% year-to-date, as of April 23, 2018, according to Morningstar. In 2014 and 2015, the fund returned -10.25% and -24.56%, performance similar to Raw Earth’s.

Its higher concentration in energy and lower geographic diversity could explain the difference in performance between IGE and Raw Earth.

Risks and considerations

It’s important to note that this investment can be volatile, as discussed, because of the strong influences international economies, politics, and environmental changes play.

For example, policy regarding environmental regulation has see-sawed in the U.S., creating increased volatility in the energy markets.

The fund is also vulnerable to a number of other risks, principally related to potential currency fluctuation and geographic focus risk, according to the prospectus. Also, because the fund’s assets are concentrated within a few closely-tied industries, it’s not diversified.

The fund has an expense ratio of 0.4%, which is slightly above average, according to industry data.

By Sam Becker
Sam Becker is Stash's financial writer.

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