Jay, could tell us a bit about yourself and Global X?
Global X is a New York-based ETF (Exchange Traded Fund) provider focused on listening to our clients and empowering them to invest wisely in unexplored and intelligent solutions. We are known for our Thematic Growth suite of ETFs that provide exposure to long-term structural trends with high-growth potential. We are also known for our Income suite, which provides access to a variety of income-strategies, our International Access suite, which provides efficient access to a variety of geographies, and our Commodity suite, which allows investors to access baskets of equities with exposures to specific commodities. As the Head of Research and Strategy at Global X, I lead the firm’s research team, which originates the firm’s uni- que insights on the markets and ETFs. I also guide the planning and development of the firm’s strategic direction.
Thanks, could you provide an overview of the structure of Global X’s mining-focused ETFs?
Global X’s commodity ETFs are designed to invest in a basket of commodity miners or other companies with exposure to a certain commodity. For example, the Global X Silver Miners ETF (SIL) invests in companies involved in silver mining around the world. By in- vesting in these equities, investors can avoid the contango issues that plague futures-based commodity investing, and potentially receive favorable tax treatment if held for long-term capital gains.
What are the benefits for investors in investing in an ETF over, say, investing in an actively managed fund? Why is an ETF better?
Passively managed ETFs, i.e. those that track indexes, do not try to pick individual companies that may outperform. Instead, they utilize a disciplined approach to get exposure to a specific area or strategy. Sticking with the silver miners example, SIL is not trying to pick which silver mining stock is best positioned to succeed. Rather, it is looking to gain broad exposure to the global opportunity set of silver miner equities. We expect the majority of performance to be driven by the common factors that move those stocks, such as the underlying price of silver, rather than idiosyncratic aspects of each individual stock. Actively managed funds are much more focused on selecting individual stocks that they think will outperform their peers. This can potentially result in higher turnover, emotional decision making, and higher fees.
What is your current favorite in- vestment metal and investment theme?
One metal that we believe has long-term attractiveness is copper, which is an important input for infrastructure development as well as electric vehicles. We believe that the transportation industry is ripe for disruption with deca- des-long underinvestment in US infrastructure, EVs getting closer and closer to cost-parity with internal combustion engines, and autonomous vehicles on the near horizon. Each of these themes should point towards higher copper consumption in the near future.
You recently wrote a note on uranium. Where do you see the opportunities and risks for investors in uranium miners?
Uranium is primarily driven by the consumption needs of nuclear power plants. While the developed world has somewhat cooled on nuclear, it is playing an increasingly important role in meeting the energy demands of fast growing emerging markets like India and China. Nuclear is rare in that it does not contribute to air pollution and yet can provide massive amounts of energy to the grid. This is critical to India and China, where air pollution is becoming increasingly dire and yet energy demands are growing rapidly each year.
Turning to EVs and lithium-ion batteries – how quickly will EVs be able to win a meaningful share of the transportation market, and what do you think the future holds for lithium and battery raw materials?
Analysts expect that EVs could reach cost-parity with ICEs as soon as 2025, at which point I believe adoption is likely to go parabolic. Consumers have shown a keen interest in EVs already because of their ‘cool’ factor, cheap fuel, low maintenance costs, and environmental friendliness. Once they become cheaper than ICEs, it’ll be the final straw, and sales should accelerate rapidly. Automakers are already scrambling to se- cure supply for expected future battery demand, looking to source metals like lithium, nickel, and cobalt. This should result in significant upward pressure on the prices of these commodities.
What are your views on the US-China trade war? Has this trade war or the fear of its expansion impacted investment in your ETFs?
It’s difficult to accurately assess the risks associated with the US-China trade war because the economy is doing well domestically, and companies are looking to accelerate purchases to avoid future tariffs. We think this is clouding the data and potentially undermining the risks associated with an extended trade war. Clearly, any trade war that reduces demand from China could impact industrial metals as well as specific sectors of the Chinese economy, like the industrial sector as a whole. We believe other areas will be more insula- ted from the trade war, like the consumer sectors in China, given that those are more of a domestic-demand story.
SVP, Head of Research & Strategy, Global X
Having joined Global X in 2013, Jay leads the firm’s research team, which originates the firm’s unique insights on the markets and ETFs. He also guides the planning and development of the firm’s strategic direction. Jay is a frequently cited expert in the financial media, including CNBC, Bloom- berg, and The Wall Street Journal.Prior to joining Global X, Jay was a business analyst at the New York Stock Exchange (NYSE), in the ETF and Indexing Group, where he helped to launch hundreds of ETFs on the NYSE Arca trading plat- form. Jay holds a bachelor’s degree from Emory University in International Studies and is a CFA charterholder.