Uranium ETFs: An Emerging Market Opportunity (Updated 2023)
Despite the challenges seen in the past, uranium is hitting new strides. In conjunction, new investment options are emerging in the space.
Exchange-traded funds (ETFs) are one of the fastest-growing investment vehicles, and as uranium's rebound continues to build, investors are becoming increasingly interested in uranium ETFs and related products.
The uranium spot price has climbed in Q2 and Q3 on supply risks and a bullish outlook for long-term demand. Whether it will continue to strengthen is uncertain, but those with a positive view of the market think it will happen — supporting factors include the lack of new uranium mines coming online, Russia’s dominance in uranium conversion and enrichment, rising demand for low-carbon energy sources and the continued development and deployment of small modular reactors.
There is also increasing demand for uranium from China and India as both these countries grapple with air pollution in the face of growing electricity demand. China is working to expand its nuclear power capacity, and although it ranks among the top 10 uranium-producing countries, the Asian nation relies heavily on uranium imports to meet its nuclear fuel demand.
A more recent concern is the strengthening relationships that Kazakhstan — the world’s number one uranium producer — has with Russia and China. "When you have most of the uranium demand in the west — 25 percent of the world's uranium demand comes from the US alone — when you have this major player increasingly tied to both China and Russia, that creates a lot of risk for western nuclear utilities,” said Justin Huhn of Uranium Insider. “Especially when they are voluntarily avoiding business with Russia currently, and when that material has the ability to be officially sanctioned by the US."
As mentioned, that backdrop is helping uranium ETFs and related products gain steam. Today there are five uranium ETFs available to investors, as well as two investment vehicles backed by physical uranium — and perhaps more to come.
"There is going to be probably a half dozen (physical vehicles) by this time next year," Huhn said. "You can talk about supply and demand until you're blue in the face, but this element of financially driven vehicles that give the investor a lot of power to actually influence the price of the commodity … is pretty unique."
Read on to learn about the uranium ETFs and related vehicles on offer. All data was current as of August 24, 2023.
Total asset value: US$3.62 billion
Of all the uranium-focused funds, this one has created the most buzz as it was the first investment vehicle tied directly to physical uranium. Launched in July 2021, the Sprott Physical Uranium Trust quickly made its mark on the space, stoking investor interest and prices for the commodity. This fund has an expense ratio of 0.7 percent and a year-to-date return of 15.72 percent.
Total asset value: US$1.71 billion
The Global X Uranium ETF tracks a basket of uranium miners, as well as nuclear component producers. The fund has an expense ratio of 0.69 percent and has achieved a year-to-date return of 7.86 percent.
Uranium companies account for more than 70 percent of its holdings, and nearly half of those companies are Canadian. Interestingly, one of its top three holdings is the Sprott Physical Uranium Trust at a weight of 10.27 percent. Its other top holdings include Cameco (TSX:CCO,NYSE:CCJ) at a weight of 24.04 percent and NexGen Energy (TSX:NXE,NYSE:NXE) at 6.23 percent.
3. Zuri-Invest AG Physical Uranium AMC
Total asset value: US$1.03 billion
Launched in April 2023, Zuri-Invest’s product is the second investment vehicle to come to market that is directly linked to physical uranium; however, it is the first actively managed certificate (AMC) in the sector. According to Zuri-Invest, “an AMC is a security that can be managed on a discretionary basis enabling the active management of a chosen investment strategy.”
Qualified non-US institutional and professional investors can take part in this physical uranium AMC (Swiss ISIN code CH1214916533) through their bank. The custodian of the product is Cameco, which holds the physical uranium in a secure storage facility in Canada.
Total assets: US$1.02 billion
The Sprott Uranium Miners ETF includes both uranium producers and explorers for broader exposure. The fund has an expense ratio of 0.85 percent and a year-to-date return of 8.47 percent.
Small-cap companies account for 50.79 percent of the ETF's holdings. Some of the top constituents are Cameco at 17.21 percent, NexGen Energy at 5.14 percent and Denison Mines (TSX:DML,NYSEAMERICAN:DNN) at 5.04 percent.
Total asset value: US$84.33 million
The VanEck Vectors Uranium + Nuclear Energy ETF launched in 2007 and tracks a market-cap-weighted index of companies in the uranium and nuclear energy industries. The fund has an expense ratio of 0.61 percent and a year-to-date return of 14.41 percent.
Large-cap companies account for nearly 59 percent of its holdings. Its top three holdings are Constellation Energy Group (NASDAQ:CEG) at a weight of 8.8 percent, Cameco at 7.27 percent and Public Service Enterprise Group (NYSE:PEG) at 7.23 percent.
6. Sprott Junior Uranium Miners ETF (NASDAQ:URNJ)
Total asset value: US$57.63 million
The Sprott Junior Uranium Miners ETF is a recent addition to the uranium ETF universe. Launched in February 2023, it tracks the NASDAQ Sprott Junior Uranium Miners Index, which in turn follows small uranium companies.
The fund's 29 constituents are all uranium mining, development or exploration companies, and its top holdings are Uranium Energy (NYSEAMERICAN:UEC), Paladin Energy (ASX:PDN,OTCQX:PALAF) and NexGen Energy. It has declined year-to-date.
Total asset value: US$57.63 million
The Horizons Global Uranium Index ETF, created in 2019, was the first pure-play uranium ETF in Canada and provides exposure to uranium industry growth. The fund has an expense ratio of 0.86 percent and a year-to-date return of 11.05 percent.
Some of its top holdings are Kazatomprom (LSE:59OT,OTC Pink:NATKY) at 20.28 percent, Cameco weighing in at 20.27 percent and NexGen Energy weighing in at 6.78 percent.
This is an updated version of an article first published by the Investing News Network in 2021.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.