Sustainable Wealth Management is the latest entrant into the North-American oil sands market, launching their first ETF, the Sustainable North American Oil Sands ETF (SNDS) that gives investors broad exposure in to the space.
SNDS seeks to track the Sustainable North American Oil Sands Index, a benchmark that comprises of companies with operations in oil exploration, production, refining, transportation and storage. Depending upon the depth of the market, the underlying index may consist of up to 40 US or Canada based companies, allocating equal weights to each.
The benchmark only considers companies that trades on a North American exchange and have achieved at least $5 million in average trading volumes in the last 100 days. Some of the components of the ETF are large reputable companies such as Exxon Mobil, Conoco Phillips, marathon, Chevron etc. that are engaged in more traditional exploration and refining activities. The fund also holds ADRs of giant multinationals like Royal Dutch Shell, PetroChina, Statoil and Total.
Every quarter the index is rebalanced to ensure the equal weights are maintained. A handful of small and mid cap companies such as Nexen, Baytex Energy and Canadian natural Resources also find their way into the fund.
Oil sands refer to sandstone that contains a blend of petroleum, water, sand and clay. The biggest oil sand reserves are found in the province of Alberta in Canada and the recoverable amount accounts for nearly 95 percent of Canada’s oil reserves and are equivalent to three quarters of North American reserves. New technologies have made it profitable to extract oil from these types of deposits and Canadian oil sands are one of the biggest proven oil reserves outside of OPEC nations.
However, this ETF is not entirely dependent oil sand companies as evident from the index and hence is safer than you may think. A large part of its gains are expected to be influenced by the broad oil market trends outside North America.
SNDS charges 50 basis points as fees and can be an important fund for investors keen to participate in the hydrocarbon growth in North America by shifting the balance from the current Russia/OPEC dominated producer market.
I should point out, however, that due to the complex nature of extraction technology, profits may come under pressure if global prices fall sharply—no surprise there. SNDS nonetheless has been designed to give investors exposure to the global energy sector with the potential to generate above average yields.
Of course, as is the case with all new ETFs, I will wait a few months to examine price and volume developments before considering SNDS as an addition to our StatSheet.
Disclosure: No holdings
Contact Ulli