Exchange traded funds are only as good as their underlying holdings, and more fund providers are beginning to take a second look at their benchmarks. Recently, Van Eck Global, the manager behind Market Vectors, said it will swap out the index on its agribusiness ETF for an in-house benchmark.
According to a press release, the Market Vectors Agribusiness ETF (MOO) will track the Market Vectors Global Agribusiness Index as of March 18, 2013. MOO currently follows the DAXglobal Agribusiness Index, which provides exposure to global companies that generate at least 50% of their revenue from agriculture related businesses.
Current top holdings include Monsanto 8.2%, Syngenta 7.2%, Potash 6.9%, Deere & Co. 6.5%, Uralkali-Gdr 5.7%, Brasil Foods 4.8%, Wilmar International 4.8%, Archer-Daniels 4.7%, Mosiac 4.4% and Agrium Inc. 3.9%.
Current country allocations include U.S. 36.9%, Canada 11.2%, Singapore 8.3%, Switzerland 7.4%, Russia 5.8%, Brazil 5.6%, Malaysia 5.0%, Japan 4.0%, Norway 3.7% and Netherlands 3.3%.
The Market Vectors Global Agribusiness Index will screen for liquidity and market cap, and it will only track companies that generate at least 50% of their revenues from the global agribusiness industry. The difference can be seen in the component holdings and country weightings.
Top holdings include Monsanto 8.3%, Syngenta 7.8%, Potash Corp 6.9%, Deere & Co. 6.5%, Archer-Danielsb5.4%, Mosaic Co. 4.9%, Brasil Foods 4.7%, Agrium 4.6%, Kubota 4.3% and CF Industries 4.0%.
Country allocations include U.S. 40.6%, Canada 11.8%, Switzerland 7.8%, Japan 5.1%, Brazil 4.7%, Malaysia 3.6%, Singapore 3.4%, Germany 3.3%, Norway 3.1%, Russia 3.0, Italy 2.7%, Australia 2.7%, Chile 1.6%, Israel 1.6%, Indonesia 1.2%, Thailand 1.1%, Netherlands 0.9% and Taiwan 0.5%.
"We expect that MOO will become more diversified as a result of these changes," Brandon Rakszawski, Marketing Product Manager at Market Vectors, said in the press release. "Constituent capping will continue to help avoid overconcentration in a few large holdings and the pure-play nature of the index will allow MOO to offer truly representative exposure to the agribusiness industry."
"We believe that the business of food is a critical industry and one that's growing in importance and potential opportunity for investors," Ed Lopez, Marketing Director at Market Vectors, said. "So, it is important for us have an index that best reflects the agribusiness industry and one that matches our philosophy of offering ETFs truly constructed for the asset class they are intended to track."
The Market Vectors Global Agribusiness index is among Van Eck's new "home-grown" indices. The development of their own indices helps the firm to reduce licensing fees for third-party benchmark providers.
On Tuesday, MOO experienced significant trading volume, which coincided with the announcement of the index change.
Over the long-term, the fundamentals favor the farming industry, as it is estimated that agricultural output will have to double by 2050 to meet growing global demand. Investors can gain exposure to the growth through MOO and other agribusiness ETFs like PowerShares Global Agriculture Portfolio (PAGG), IQ Global Agribusiness Small Cap ETF (CROP) and MSCI Global Agriculture Producers Fund (VEGI).
Market Vectors Agribusiness ETF
Max Chen contributed to this article.