Toronto-based Sprott Asset Management is preparing to launch an ETF in Europe providing exposure to companies in the uranium mining industry.
Nuclear power has been touted as an important bridging fuel while new renewable capacity is being built.
The Sprott Uranium Miners UCITS ETF will list on London Stock Exchange in US dollars (URNM LN) and pound sterling (URNP LN) later in May.
It will come with an expense ratio of 0.85%.
The fund is being brought to market in partnership with white-label ETF issuer HANetf who will be responsible for marketing and distribution responsibilities.
The ETF will replicate the strategy behind Sprott’s US-listed Sprott Uranium Miners ETF (URNM US) which the firm recently acquired from indexing boutique North Shore Indices.
Having begun 2021 with just $40 million in assets, AUM in the US-listed Sprott Uranium Miners ETF has surged lately to approximately $1 billion due to a combination of robust inflows and stellar returns – the fund is up 98.0% between 1 January 2021 and 22 April 2022.
The ETF’s strong performance has been driven by an explosion in uranium spot prices as publicity surrounding the global climate crisis has raised the demand for clean, emissions-free sources of power such as nuclear energy – uranium is the fuel most widely used by nuclear power plants as it has the unique feature of being able to self-sustain nuclear fission.
The fund’s rally also accelerated amid the ongoing war in Ukraine – the ETF has gained 51.7% since Russia invaded on 24 February – as the conflict highlighted the importance of reducing Europe’s reliance on Russian oil and natural gas.
John Ciampaglia, CEO of Sprott Asset Management, said: “The need for low emissions energy is critical: countries are committing to reducing their carbon footprint while global electricity demand is rising and many are facing energy insecurity from traditional fossil fuels. We believe that nuclear energy may serve as a key solution to these energy and climate change initiatives.”
Hector McNeil, co-CEO and co-Founder of HANetf, added: “The twin crisis of climate change and Russia’s invasion of Ukraine show the desperate need for the UK and other European nations to diversify their energy supply. We’ve seen bold government commitments on restraining the rise in global temperature to 1.5C but that will require a revolution in how we generate our energy. While wind and solar have made huge strides and will be core parts of future electricity generation, it is becoming clear that nuclear generation also needs to be part of the panoply of solutions.”
The ETFs track the North Shore Sprott Uranium Miners Index which targets companies worldwide that specialize in the mining, exploration, development, and production of uranium, as well as firms and trusts that hold physical uranium, uranium royalties, or other uranium-related, non-mining assets. Eligible firms must have market capitalizations above $40 million.
Chosen constituents are weighted by market capitalization while setting the aggregate weight of miners, explorers, and developers at 82.5% and the aggregate weight of firms that hold physical uranium or royalties at 17.5%.
Capping rules aim to enhance diversification by limiting the weight of the largest company to 15%, the combined weight of all companies above 5% to 40%, and the weight of any firm outside of the top five to 5%.
The index is rebalanced on a semi-annual basis.
As of the end of March, Canadian stocks accounted for well over half (58.8%) of the total index weight with the next-largest country exposures being Kazakhstan (14.4%), Australia (11.7%), and the US (6.9%).
Cameco, the world’s largest uranium producer at 18% of global production, accounted for the largest index weight at 18.2%. Other notable positions included JSC National Atomic Company Kazatomprom (14.4%), Sprott Physical Uranium Trust (10.3%), Energy Fuels (5.4%), and NexGen Energy (5.0%).
The fund is slated to be the second ETF in Europe targeting the uranium industry. Earlier this week, New York-based Global X launched the Global X Uranium UCITS ETF (URNU LN) which is linked to the Solactive Global Uranium & Nuclear Components v2 Index and comes with an expense ratio of 0.65%.