Global X’s Copper Miners ETF is now live: Here’s what you need to knowÂ
The new fund allows Australian investors to gain exposure to structural tailwinds supported by clean energy and electric vehicles.
Australian investors keen for exposure to one of the most in-demand industrial metals have a fresh investment option with the launch of the Global X Copper Miners ETF (ASX: WIRE) on the ASX on Wednesday.
WIRE aims to provide pure play exposure to global copper miners that stand to benefit from potential growth in technology, infrastructure and clean energy.
The exchange-traded fund (ETF) indirectly tracks the Solactive Global Copper Miners Total Return Index by virtue of being a feeder fund that invests directly in the US-listed Global X Copper Miners ETF (NYSE ARCA:COPX), which has more than US$1.6 billion in assets under management.
The benchmark index is open to companies that either are expected to or do generate a significant part of their revenue from copper mining and/or closely related activities.
"The investment opportunity for Australian investors is to use WIRE in a portfolio as an indirect exposure to the price moves of copper as global economic activity continues to recover," Global X ETF Australia head of investment strategy Blair Hannon said.
The launch adds to the bulging ETF portfolio of Global X (formerly known as ETF Securities Australia), which is part of international investment manager Mirae Asset Financial.
Why Copper?
The new fund is focused on capturing potential growth as copper lends itself to numerous industries that power economic activity.
Copper has been in demand for over 10,000 years thanks to its properties as a conductor of electricity and heat, plus resistance to corrosion. Its applications include electrical equipment, infrastructure, industrial use, construction and transportation.
These multifaceted uses have driven the demand for copper around the world. Copper demand increased by 28% over the last decade with more than 20 million tonnes consumed each year across a variety of industries. It is highly correlated with economic activity and is often seen as a leading barometer for global economic health.
Copper demand and consequently prices are predicted to increase as the pandemic recovery advances.
Analysts now see the global transition towards renewable energy, electric vehicles and infrastructure development stretching this demand even further. The International Energy Agency recently forecast copper demand to treble by 2040 as net-zero goals accelerate.
Copper prices hit a record high of US$10,845 per tonne earlier this year and are still trading above their 10-year average, at around US$8,000 a tonne.
What do you actually own?
The Global X Copper Miners ETF provides investors seeking capital growth medium-to-long-term exposure to companies with significant exposure in the copper mining industry.
It tracks the performance of the Solactive Global Copper Miners Total Return Index, which in turn includes companies with a minimum market capitalisation of US$100 million and an average daily turnover of US$0.25 million over the last 3 months. These eligibility requirements double for new companies.
The benchmark has an individual stock cap of 4.75% to ensure diversification. The minimum number of constituents is 20 and the maximum is 40.
Its top 10 holdings include Canadian miners First Quantum (TSE: FM) and Ivanhoe Mines (TSE: IVN), US-listed Freeport McMoRan (NYSE: FCX) and Southern Copper (NYSE: SCCO), China's Zijin Mining (SHA: 601899) as well as Australian mining giant BHP (ASX: BHP).
The WIRE ETF has an annual management fee of 0.65%.
Key risks of this ETF
Investors stand to benefit by using the WIRE ETF in 3 ways – to access growth themes such as the rise of Asia and clean energy technology, to take a tactical view on the copper price or even as a hedge against inflation.
But like all financial investments, it comes with both sector-specific and broader risks:
- One risk of investing in copper miners is the copper price deteriorates, which would negatively impact revenues and profits.
- Copper miners often operate in higher-risk jurisdictions and can be impacted by unfavourable political environments.
- ETF trading volume is generally low, so investors may not have adequate liquidity.
- Potentially less diversification as this ETF is concentrating on a particular part of the resources sector.
- Higher risk because the fund comprises mostly growth assets that tend to exhibit higher levels of price volatility.
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