Battery metals commodities ETFs
WisdomTree has launched two commodities ETFs in Europe that invest in the future of metals mining, via futures. Both track indexes made by WisdomTree with help of clean energy
consultancy Wood Mackenzie.
WENT tracks the WisdomTree Energy Transition Metals Commodity Index. It buys metals used to produce green technology like EVs, charging stations, wind turbines, solar power systems. Metals are weighted based on how much they will be used in renewable energy. It’s current holdings are: nickel (25%), copper (19%), aluminium (14%), silver (13%), zinc (12%), tin (8%), platinum (5%), and gold (3%).
WATT tracks the WisdomTree Battery Metals Commodity Index. It more simply targets metals used in batteries. Its current weightings are: nickel (48%), aluminium (26%), copper (17%), and zinc (10%).
WisdomTree doesn’t buy the futures itself. It gains exposure instead through swaps provided by BNP Paribas.
The funds charge 0.45%.
Bernie’s commentary – interesting idea
Commodities – as opposed to shares in businesses– are a valid way of investing in green energy. Nickel, copper and zinc have surged the past two years on the back of demand for batteries. Lithium has surged the most of all the battery elements, however its futures market is pretty rubbish from what I understand. Hence there are no lithium futures in these ETFs.
WisdomTree will have opted for futures rather than physical as regulators dislike asset managers hoarding industrial metals. European governments worry that taking physical metals out of the supply cycle gives speculators too much control over prices. And in any event, copper and aluminium oxidize when held in warehouses. This makes a physical copper ETF a very different proposition to a physical gold ETF. Gold by contrast is inert and governments do not care what speculators do to its price.
My gut feel is how well or badly these funds do will rest largely on the weighting scheme used. Aluminium and copper are used in a whole bunch of things and not just batteries. This makes market weighting metals futures arguably illegitimate for those wanting to access the theme. Wood Mackenzie has produced this solution based on clean energy use intensity. We’ll have to wait and see how it performs.
As these are futures-based ETFs they come with the usual warnings. Contango is going to be real. And there are often extra fees embedded beyond the management fee.