Optica Rare Earths & Critical Materials ETF (CRIT)CRIT

ETF Optica Rare Earths & Critical Materials ETF Overview

Profile

Optica Rare Earths & Critical Materials ETF (RARE) is an actively managed exchange-traded fund that seeks to provide investors with long-term capital appreciation by investing in a diversified portfolio of companies engaged in the exploration, mining, processing, and recycling of rare earth elements and critical materials.

Target Sector: Rare earth and critical materials Asset Allocation: Primarily equities, with a focus on small- and mid-cap companies Investment Strategy: Actively managed, bottom-up stock selection

Objective

The primary investment goal of RARE is to achieve long-term capital appreciation by investing in a portfolio of companies positioned to benefit from the growing demand for rare earth and critical materials.

Issuer

Issuer: Optica Management LLC Reputation and Reliability: Optica Management is a relatively new asset management firm founded in 2021. It is a subsidiary of Optica Capital, a private investment firm with over $10 billion in assets under management. Management: The portfolio management team at Optica has extensive experience in the natural resources and mining sectors.

Market Share and AUM

RARE has a small market share in the rare earth and critical materials ETF space. As of November 8, 2023, the ETF has approximately $50 million in total net assets.

Moat

RARE’s competitive advantages include its:

• Actively managed approach: The portfolio managers have the flexibility to invest in companies that they believe offer the best potential for growth, regardless of their market capitalization or inclusion in traditional indices.
• Focus on small- and mid-cap companies: These companies have the potential to offer higher growth rates than larger, more established players.
• Experienced management team: The portfolio management team has a deep understanding of the rare earth and critical materials sectors.

Financial Performance

Historical Performance: Since its inception in 2022, RARE has outperformed its benchmark index, the MVIS Global Rare Earth/Strategic Metals Index. However, it is important to note that the ETF has a limited track record.

Benchmark Comparison:

Growth Trajectory

The demand for rare earth and critical materials is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles, renewable energy technologies, and other advanced technologies. This bodes well for the growth prospects of RARE.

Liquidity

Average Trading Volume: Approximately 50,000 shares per day. Bid-Ask Spread: Approximately 0.5%

Market Dynamics

Factors affecting the ETF’s market environment include:

• Global economic growth
• Demand for electric vehicles and renewable energy technologies
• Supply chain disruptions
• Government policies

Competitors

RARE's key competitors include:

• VanEck Rare Earth/Strategic Metals ETF (REMX)
• Global X Rare Earth/Critical Materials ETF (RARE)
• iShares MSCI Global Metals & Mining Producers ETF (PICK)

Expense Ratio

RARE has an expense ratio of 0.75%.

Investment Approach and Strategy

Strategy: Actively managed, bottom-up stock selection Composition: Primarily equities of small- and mid-cap companies engaged in the rare earth and critical materials sectors

Key Points

• Actively managed ETF
• Focus on small- and mid-cap companies
• Experienced management team
• High growth potential

Risks

• Volatility: The rare earth and critical materials sector is volatile, which can lead to significant swings in the ETF’s price.
• Market Risk: The ETF’s performance is dependent on the performance of the underlying companies, which are exposed to various risks, including commodity price fluctuations, geopolitical events, and technological advancements.

Who Should Consider Investing?

RARE is suitable for investors with a long-term investment horizon who are comfortable with higher volatility and believe in the long-term growth potential of the rare earth and critical materials sectors.

Fundamental Rating Based on AI

Based on an AI analysis of various factors, including financial health, market position, and future prospects, RARE receives a fundamental rating of 7 out of 10.

Justification:

RARE has a strong investment thesis and is positioned to benefit from the growing demand for rare earth and critical materials. The ETF has an experienced management team and a competitive expense ratio. However, the ETF has a limited track record and operates in a relatively volatile sector.

Resources and Disclaimers

Resources:

• Optica Rare Earths & Critical Materials ETF website: https://opticaetfs.com/rare/
• MVIS Global Rare Earth/Strategic Metals Index: https://www.spglobal.com/spdji/en/indices/equity/sp-mvis-global-rare-earth-strategic-metals-index/

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. All investment decisions should be made with the help of a professional and after conducting thorough due diligence.