Market Overview

Tesla-Heavy ETF Gets A New Look

Tesla-Heavy ETF Gets A New Look

An exchange traded fund once known for its large weight to Tesla Inc. (NASDAQ: TSLA) is getting a new look while maintaining its robust exposure to shares of the electric automobile manufacturer.

What Happened

The ETF previously known as the VanEck Vectors Global Alternative Energy ETF is now the VanEck Vectors Low Carbon Energy ETF (NYSE: SMOG). SMOG tracks the Ardour Global Index.

“The index is intended to track the overall performance of low carbon energy companies which are those companies primarily engaged in alternative energy which includes power derived principally from bio-fuels (such as ethanol), wind, solar, hydro and geothermal sources and also includes the various technologies that support the production, use and storage of these sources,” according to VanEck.

Why It's Important

Even with the new look, SMOG has healthy Tesla exposure. The stock is the fund's third-largest holding at a weight of 10.08%. About 10 countries are represented in SMOG, but U.S.-based companies account for over two-thirds of the fund's weight.

The conversion to SMOG and the new index took place on July 9.

“As climate change and its potential solutions have become more present in our global discourse, the language used by those within the energy sector, as well as those investing in it, has changed and evolved,” said VanEck's Ed Lopez in a statement. “What used to be referred to as ‘alternative energy’ is now more commonly referred to as ‘green,’ ‘clean’ or ‘renewable,’ and numerous large public companies in the energy space have acquiesced to investor demands to set more stringent, low carbon, emission standards.”

SMOG allocates about half its weight to industrial stocks and 27.1% to the technology sector. The utilities and consumer discretionary sectors combine for 21% of the fund's roster.

What's Next

At a time when coal production is declining and alternative energy production prices are doing the same, SMOG's debut could be well-timed. As it is, several clean energy funds are among this year's best-performing ETFs, indicating renewed investor interest in the segment.

SMOG charges 0.63% per year, or $63 on a $10,000 investment.

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