On this episode of the “ETF of the Week” podcast, VettaFi’s head of research, Todd Rosenbluth, discussed the Sprott Rare Earths Ex-China ETF (REXC) with Chuck Jaffe of Money Life. The pair discussed several topics related to the ETF, in order to give investors a deeper understanding of it. Chuck Jaffe: One fund, on point for today. The expert to talk about it. This is the ETF of the Week!
Welcome to the ETF of the Week, where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. And if you go to VettaFi.com, you can find all the tools you need to be a savvier, smarter ETF investor, and to get more details on the new, newsworthy, trending, and timely ETFs that we discuss here. Todd Rosenbluth, great to chat with you again!
Todd Rosenbluth: It’s great to be back, Chuck!
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The Sprott Rare Earths Ex-China ETF, REXC or “REX-C.”
Chuck Jaffe: REX-C! REXC, The Sprott Rare Earths Ex-China, excluding China, ETF. So, let’s start with the rare earths story. We’ll get to ex-China. But I think it’s pretty obvious why rare earths now. But why do you want a focused rare earths play?
Todd Rosenbluth: So, a couple of things. First, let’s call out — this is a new fund. This fund launched roughly a month ago in April. It’s still gathering assets. It’s still in [its] early days. But rare earths as an investment theme has been popular for a while because rare earths are critical to global defense systems, to energy, to electrification, data centers — I could go on and on.
All of the themes that you are thinking about investing in, rare earths are a key element, a critical material, in that they’re so hard to find, and it’s extremely important. That is a theme that’s been playing out. People probably, if they’ve heard of rare earths, they might have heard about it a few months ago when the U.S. and China were negotiating, and China was essentially… because China is the dominant supplier of rare earths. That’s where many of the companies are based.
The U.S. and China were having a — let’s go with a disagreement, and tariffs related to it and blockages of it. So, we think this ETF gives you a chance to have greater security in the supply chain, invest in companies that are outside of China that are critical to the thematic trends that are going to drive the next wave of investments.
Chuck Jaffe: Rare earths is a distinct play, and it’s got its role. But this is also basically something of a physical fund. Do you treat this like it’s a precious metals fund? Do you treat this like it’s an industrial fund?
Todd Rosenbluth: So, I think of this similar to — we’ve talked about gold mining beforehand. So, gold mining is part of the equity slice of a portfolio. They are in the materials area as well. It obviously is impacted by the price of gold. No one is logically following the price of these individual materials.
But what you own, if you own this ETF or you’re considering owning this ETF, are shares of publicly traded stocks — companies like MP Materials and USA Rare Earth, to name a couple of those stocks. You’re going to own companies, as I mentioned, that are based outside of China. So that’s Australia, the United States, Canada, the UK.
This is an equity slice of the portfolio. So, to your question of where I thought you were going of ‘how do you use this’: this is a thematic ETF. So, we talked last week, and it helped to trigger for me — we talked about a thematic ETF from Roundhill, (DRAM), that came out of the gate very strong, and it’s tied to artificial intelligence and the demand.
This is a different, also new, still-growing-in-assets thematic ETF that can be a complement. This is a materials-related product as opposed to a technology-related product. But this is [in] your equity slice of your portfolio, getting a satellite position probably.
Chuck Jaffe: So, you know, in the introduction for ETF of the Week, I typically mention new and newsworthy funds, right? And as you pointed out, REXC is a new fund. It’s also newsworthy in that it’s in this space and it’s ex-China. But I’m curious because, as you pointed out, this has been a bit of a theme for a while.
You could have gone with some well-established, multi-year-old competitors. I mean, VanEck has a rare earth fund, its ticker symbol (REMX B-), that has a couple of billion dollars in it. Global X has a rare earth fund. It has more in assets than the Sprott fund. The Sprott fund’s picked up over 30-plus million dollars in its first couple of weeks.
The Global X fund is not much bigger than that, and it’s been around for several years. But what both of those funds don’t have — and there are others, by the way, in the market, I just mentioned those two — is the exclusion for China. So, why the new fund rather than the established competitors? And how does the ex-China factor into that decision?
Todd Rosenbluth: Okay. So there’s… rightfully, there’s a lot in there. So, I think there are two parts of it. One is you’ve got companies… so this ex-China is a key part of it. And so we’ve seen demand for ex-China ETFs for broader emerging markets. iShares has one. Vanguard recently launched one. I think we might have actually talked about it as an ETF of the Week — apologies for not remembering — for people who want to get exposure to a broader regional play but exclude China. So this is a thematic way of doing it.
You’re right. There are other ETFs that have rare earth in the name. I’m looking at the VanEck one that you mentioned, REMX, that is the Rare Earth and Strategic Materials ETF. And I think — I’m going from remembering this — that the strategic materials is actually a healthy part of the overall portfolio. And so you don’t get a targeted part of rare earths; it’s a slice. It’s combined with other things. That ETF, REMX, has 28% exposure to China. So what you’re getting with REXC is different.
Sprott, which is the firm that we’re talking about, has an ETF suite. And it is a Sprott Critical Materials ETF that I believe also has a slice of rare earth exposure, but also has exposure to other parts of the materials ecosystem that people might be considering and that are critical to this space. So it’s important to know what’s inside the portfolio. It’s important to take a look and see what you’re getting from a regional, a country exposure, and from an individual stock exposure as well. But there are lots of different ways to play this theme.
Chuck Jaffe: Yeah, there are. And the other thing that is interesting there is that depending on, you know, who you’re using as a fund evaluator, et cetera, the Sprott Critical Materials fund — the ETF that you mentioned — has been considered a stellar performer by everybody who rates it. That VanEck fund that you were talking about has not been considered a stellar fund. It’s gotten lots of assets because it was kind of the first one to the space, but that’s part of it, too. I mean, management does count in all of this.
Todd Rosenbluth: Right. So with… in all of these cases, we’re talking about an index-based approach. And it matters what goes inside the index-based approach and what exposure. The devil is very much in the details with thematic investing as to what you own, and thus driving the overall performance.
So, you’re right. Some of these funds have been around longer. Some of them have track records that are stronger than others. This fund is new. And to just repeat, this has a roughly a month-old track record, so it’s not even worth citing. It’s the exposure that it provides, the concentration outside of China that has caught my eye. Again, as you mentioned, a firm that has exposure within this space in a more diversified manner.
Chuck Jaffe: So, it’s a thematic fund. Again, while you talked about it and compared it maybe to gold miners… well, somebody who’s getting into gold or leaning into gold typically understands what they’re doing. They may be a little bit more holding the physical gold as an allocation choice, and then the miners become more tactical.
Since this is a thematic play, and the theme is here and we think the theme is here to stay, is there something that would knock you off this theme? Is there something where if somebody is buying in, they should be watching and thinking, ‘Okay, I’m good with the theme, but if X happens, I might not be so good with it?’
Todd Rosenbluth: So, I think the ex-China part is relevant. It’s possible that as China and the United States look to work together and work together more closely in the future, there are agreements that are made that are supportive for rare earths and rare earth companies that are based in China. And thus, you’d be missing out on that by having an ex-China approach. So, that’s something to be watching.
I don’t — I think that the United States and China, while they most recently had a meeting, I don’t think a lot came out of that. Not necessarily good or bad, I just don’t think a lot came out of that. So, I think we’re still in a status quo, which means that for the companies that are based outside of China, there’s an opportunity to invest in them.
You’re right. I think of this as a targeted but perhaps strategic play. If you believe that this theme has legs, if you’re looking to have exposure to artificial intelligence or defense spending, and you might own one or two of those ETFs — we talked about DRAM beforehand. There are some defense and defense technology ETFs that have been gaining traction.
This can be a complement to those strategies because you’re owning different companies that are exposed to the same growing demand. So I think this can slide in, as it has already into some people’s portfolios, into a slice to complement the growth side of their equity exposure.
Chuck Jaffe: It’s a really interesting, very topical choice. It’s REX-C, REXC, the Sprott Rare Earths Ex-China ETF, the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. See you next week!
Todd Rosenbluth: Thanks a lot, Chuck. See you then!
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe, and I’m Chuck Jaffe! And you can check out my weekday podcast by going to MoneyLifeShow.com, or you can search for it wherever you find your favorite podcasts.
And if you’re searching for more information on your favorite ETFs or what might be your next favorite ETFs, well, go to VettaFi.com and dig into the tools there, which will help make you a better investor. VettaFi is on X at @Vetta_Fi. Todd Rosenbluth, their head of research, my guest, well, he’s on X, too, at @ToddRosenbluth
The ETF of the Week is here for you every Thursday, so we’ll have something else for you to consider next week. Make sure you don’t miss an episode by following along on your favorite podcast app. And until we do this again next week, happy investing, everybody!
Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.
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