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In an unprecedented move, one of the most popular junior gold miner exchange-traded funds is set to rebalance on Friday after growing too large for its market. After months of volatility, miners and investors alike are preparing for even more uncertainty.
Cursed by its own success as a $4-billion (U.S.) ETF in a $30-billion space, VanEck Vectors Junior Gold Miners ETF (GDXJ-N) began to expand beyond the index it tracks, the MVIS Global Junior Gold Miner’s Index.
Combined with VanEck’s Vectors Gold Miner ETF, (GDX-N), the company is nearing the significant shareholder status point of 20-per-cent ownership in several companies, many of which are Canadian, which means special filing requirements and significant trading restraints.
As a result, the ETF began buying shares in companies outside of its index and on April 13, VanEck announced that the index would be expanding to keep up with the ETF’s growth. The ETF will now buy gold miners with a market cap in the range of $75-million to $2.9-billion, from its earlier range of between $75-million and $1.6-billion.
But this also means the fund will have to sell over 50 per cent of its shares in some smaller companies to make room for the additions. After the announcement, the fund’s units fell sharply, from $38.06 prior to the announcement to as low as $29.33 in the following weeks.
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