This ETF gained 123% in just 3 years

23 April 2024 - 15:00

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Let’s analyze an ETF that has seen incredible performance over the last 3 years. Complete and detailed product review.

This ETF gained 123% in just 3 years

This ETF seeks to reflect the performance of the world’s largest public companies engaged in oil and gas exploration and production.

The relevance of this product lies in its ability to offer investors direct exposure to the dynamics and opportunities of the energy sector.

In this article, we will offer a detailed analysis of the pros and cons, as well as a comprehensive review.

iShares Oil & Gas Exploration & Production UCITS ETF

The iShares Oil & Gas Exploration & Production UCITS ETF stands out for some key characteristics that define its investment profile. With a Total Expenditure Ratio (TER) of 0.55% per annum, it offers a cost-effective entry into the oil and gas exploration and production sector. The management of the ETF follows a total physical replication approach, i.e. purchasing all the securities present in the reference index. This method ensures that the ETF’s performance is closely aligned with that of the underlying index, minimizing tracking error and faithfully reflecting the price changes of the included securities.

One of the features of this ETF is its dividend-linked policy, which provides for accumulation and automatic reinvestment of dividends. This policy supports compound growth of capital over time, making it particularly attractive to long-term investors looking to maximize the overall return on their investment.

Launched on 16 September 2011 and with tax domicile in Ireland, the ETF manages assets of approximately €300 million, demonstrating investor confidence and interest in the oil and gas exploration and production sector.

Main features

The strategy risk is limited to long positions, allowing investors to benefit from bullish expectations on companies included in the index.

The denomination currency of the ETF is the US Dollar (USD), transactions and valuations are conducted in USD. This is relevant for international investors, as it exposes the ETF to unhedged currency risks, which can affect returns for those investing in other currencies.

ETF performance and volatility are key indicators for investors. With annual volatility of 21%, the ETF reflects the inherently volatile nature of the energy sector. However, this volatility is balanced by potentially high returns, as demonstrated by the impressive results of recent years. The ETF’s performance, with significant growth on an annual and multi-year basis, highlights its ability to capitalize on energy market fluctuations and offer investors substantial capital growth in the medium to long term.

Fund Composition

One of the most significant features of the iShares Oil & Gas Exploration & Production UCITS ETF is its concentrated and strategic composition, which mirrors the structure of the S&P Commodity Producers Oil & Gas Exploration & Production index. The fund invests predominantly in top 10 holdings, which together represent 62.30% of its total assets. This concentration highlights a targeted approach to investing, with a particular emphasis on the most valuable and impactful companies in the oil and gas exploration and production sector.

Prominent companies within the ETF include industry giants such as Canadian Natural, ConocoPhillips, and EOG Resources, which together form a robust foundation for the fund, offering stability and growth potential. The presence of companies of various sizes and geographies contributes to risk diversification while maintaining a clear focus on the energy sector.

The geographical distribution of the portfolio highlights a strong inclination towards US companies, which make up 65.45% of the total, followed by Canadian and Australian ones. This distribution reflects the dominance of North American companies in the global oil and gas exploration and production sector, as well as offers insight into market dynamics and investment opportunities in different regions.

Historical performance

The historical performance of the iShares Oil & Gas Exploration & Production UCITS ETF offers an interesting perspective on the evolution of the energy sector in recent years. Despite the inherent volatility of the oil and gas market, the ETF has seen significant increases, with a year-to-date (YTD) increase of 17.21% and impressive performance over the past three years, culminating in an increase of 123.13%.

This upward trajectory has been influenced by several factors, including oil price fluctuations, global energy policies, and companies’ adaptation to new technologies and climate change. Despite periods of contraction, such as the 38.64% decline in 2020, the ETF has demonstrated remarkable resilience, recovering quickly and exceeding growth expectations in subsequent years.

Risk analysis

Risk assessment is key to any investment strategy, and the iShares Oil & Gas Exploration & Production UCITS ETF is no exception. The 21.00% annual volatility highlights the variable nature of the energy sector, which can be influenced by a wide range of external factors, from politics to the global economy. However, this volatility has been successfully managed through strategic investment selection and a solid fund management structure.

Return on risk, measured over one-, three-, and five-year periods, gives investors a clear indication of the fund’s efficiency in generating returns appropriate to the level of risk taken. With values ranging from 1.07 at 1 year, to 0.33 at 5 years, the ETF demonstrates an ability to balance risk and return over the long term.

Additionally, maximum drawdown analysis provides perspective on the fund’s resilience during periods of heightened market stress. A maximum drawdown since inception of -79.46% highlights the risks associated with investing in the sector, but also the ETF’s ability to recover and grow over time, thus offering a testament to its stability and recovery potential.

In conclusion, the iShares Oil & Gas Exploration & Production UCITS ETF presents itself as an attractive investment vehicle for those seeking exposure to the energy sector, offering a balance between risk and return potential, supported by careful management and a well-defined investment strategy.

The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings.

Original article published on Italy 2024-04-21 14:01:00. Original title: Questo ETF ha guadagnato il 123% in soli 3 anni


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