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Friday
Apr172015

Why Rick Rule Believes ‘Factors-Based’ Approach Makes SGDJ the Best Junior Miners ETF

Rick Rule

Last summer, Sprott Asset Management LP launched a new gold ETF, the Sprott Gold Miners ETF (NYSE Arca: SGDM). This ETF was one of the most successful new ETFs in 2014 according to ETFtrends1, garnering around $180 million in assets as of March 15, 2015.2

Sprott recently launched a second ETF called the Sprott Junior Gold Miners ETF (NYSE Arca: SGDJ).

Why should investors care about Sprott’s new ETF?

I met with Rick Rule, Chairman of Sprott US Holdings and John Ciampaglia, Sprott’s Head of ETFs, to learn more. They stressed the importance of ‘factors-based’ ETFs that use customized criteria to select and weight stocks in a particular sector.

“Investors like ETFs because they have lower management fees than mutual funds,” said Rick. “They provide intra-day liquidity and have transparent holdings. The trouble with traditional gold mining ETFs is that they are market cap-weighted. The higher the market-value of a company, the higher the weighting it represents in an index. In a sector like gold mining, where there is an extreme range in the quality of companies, this quantity-based approach doesn’t make sense.”


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