Too Much Energy

Van Eck says that a majority of people still think of commodities stock investing as being synonymous with energy investing. "We think that it's a very outdated way to look at this market," the company said. 

The reason is that most commodity equity indexes use market capitalization to weight stocks. That tilts the indexes toward Energy, as there are quite a number of large, publicly traded energy companies like Exxon-Mobil and Chevron. Meanwhile, sectors like Agriculture (where most production is held by small family farms) have low net market capitalizations, and are underrepresented in funds like IGE. 

The Market Vectors - RVE Hard Assets Producers ETF uses a consumption-based approach to weight components, rather than market capitalization, leading to a more even weighting across sectors. The index has a 30% weighting to Agriculture, for instance, and a 21% weight in Metals.  

The index also takes a unique approach to coal, viewing it as an energy play as opposed to mining play. With 50% of worldwide electricity production tied to coal, Van Eck believes the new view of coal is an important update on the old way of viewing the commodity.

International

Another important distinction is that half of the top 10 names in the Van Eck-Rogers index are based outside the U.S., including Gazprom, Petrobras and PetroChina. "That is striking; those are names that should be in any global commodity index," Van Eck said.

Scott Burns, head of ETF analysis at Morningstar, said that "the global aspect is interesting and necessary." Brazilian mining company Vale has had higher profits than Microsoft recently, he noted; how many U.S. investors know that?

Will Investors Bite?

Burns believes, and Van Eck also suggests, that the index may also be well-positioned for the current market environment. "Even if commodity prices come down, lots of these companies are still in position to makes lots of money. Monsanto doesn't need corn to stay at record levels to make solid profits," Burns noted.

Still, whether investors will flock to the Van Eck fund is an open question. Commodity-producing stocks have been trending down recently; the HAP index fell more than 10% in July alone.

Van Eck says that it's not concerned with raising a ton of assets at the outset. "What many investors have told us is that they are receptive to a good benchmark for commodity stocks. Without a good, comprehensive benchmark, it is difficult for them to judge the commodities allocations they have implemented," the company said. "As much as assets under management, we are hoping to get mind-share as a preferred way to measure commodity stocks."

The fund has an expense ratio of 65 basis points, 50 basis points of which is the management fee.

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