USCF Sustainable Battery Metals Strategy Fund (ZSB)

ETF USCF Sustainable Battery Metals Strategy Fund (USCM)

Profile:

USCF Sustainable Battery Metals Strategy Fund (USCM) is an ETF that aims to provide investors with exposure to the electric vehicle (EV) battery supply chain. It primarily invests in companies involved in the exploration, extraction, refining, and processing of battery metals such as lithium, nickel, manganese, cobalt, and graphite. USCM pursues a sustainable and socially responsible investment approach by prioritizing companies that maintain strong ESG (Environmental, Social, and Governance) practices.

Objective:

The primary investment goal of USCM is to achieve capital appreciation by providing exposure to the EV battery sector and benefiting from the anticipated long-term growth of this industry.

Issuer:

USCF (U.S. Commodity Funds) is the issuer of USCM. They have been active in the ETF space since 2007 and offer a range of commodity-focused investment vehicles.

Reputation and Reliability:

• USCF is a well-established and reputable issuer with a track record of managing various commodity ETFs.
• They are known for their transparency and disclosure practices.
• The fund has received generally positive reviews from industry experts.

Management:

• The fund is co-managed by Robert Edwards (portfolio manager) and Charles Greb (managing director) who have significant experience in the resource industry.
• The investment team consists of individuals with expertise in commodities, sustainability, and ESG analysis.

Market Share:

USCM is a relatively new ETF, launched in October 2021. As of October 26, 2023, it holds around 1% market share within the broader electric vehicle and battery metals ETF category.

Total Net Assets:

USCM's total net assets stand at approximately $22 million as of October 26, 2023.

Moat:

• Direct Commodity Exposure: Provides investors access to a diversified basket of battery metals, which can be difficult and expensive to buy individually.
• Focus on Sustainability: Invests in companies with high ESG standards, appealing to investors with ethical investment preferences.
• Experienced Management: Benefitting from the expertise of seasoned professionals in resource investment and sustainability practices.

Financial Performance:

Performance since Inception:

• Year-to-date return (as of October 26, 2023): 11.37%
• Since its inception in October 2021, USCM has witnessed a 22.3% price growth.

Benchmark Comparison: USCM has outperformed its benchmark index, MVIS Global Battery Metal & Lithium Index, which has returned 3.44% year-to-date (as of October 26, 2023).

Growth Trajectory:

USCM is positioned to benefit from the long-term growth potential of the electric vehicle market. The rising demand for electric vehicles drives the need for battery metals, creating a positive outlook for the ETF's future.

Liquidity:

Average Trading Volume: Approximately 5,400 shares traded daily. Bid-Ask Spread: The current bid-ask spread is 0.53%, indicating relatively good liquidity for an ETF of its size.

Market Dynamics:

The ETF's performance is influenced by factors like:

• EV market growth: Higher EV adoption boosts battery demand and positively impacts the underlying metals prices.
• Battery technology advancements: Innovations that increase battery efficiency can affect metal demand patterns.
• Geopolitical risks: Disruptions in the supply of critical minerals from key producing regions can impact ETF performance.

Competitors:

Key competitors in the EV and battery metals ETF space include:

• Lithium ETF (LIT): Assets under management (AUM) $340 million.
• Global X Lithium & Battery Tech ETF (LIT): AUM $2.3 billion.
• VanEck Rare Earth/Strategic Metals ETF (REMX): AUM $372 million.

Expense Ratio:

USCM's expense ratio is 0.70%.

Investment Approach and Strategy:

Strategy: USCM actively manages its portfolio to gain exposure to the electric vehicle battery metals supply chain. It utilizes ESG criteria in its investment selection process. Composition: The ETF invests in a diversified range of companies engaged in various segments of the battery metal supply chain, including mining, processing, recycling, and technology providers.

Key Points:

• Provides access to a diversified battery metals basket, enabling exposure to this emerging industry.
• Seeks to invest in companies that uphold sustainable practices.
• Managed by an experienced team with deep knowledge of commodities and sustainability.
• Relatively small fund size compared to some competitors.
• The expense ratio is higher than some passive battery metal ETFs.

Risks:

• Volatility: Battery metal prices can experience significant fluctuations due to market factors, impacting the ETF's performance.
• Market Risk: The ETF is heavily dependent on the performance of the EV industry and could be negatively affected by setbacks in EV adoption or technological advancements.
• Emerging Industry: The EV battery industry is still evolving, creating uncertainty and potential risks associated with newer technologies and market dynamics.

Who Should Consider Investing:

Investors with:

• A long-term investment horizon.
• Interest in exposure to the electric vehicle battery metal industry.
• Preference for sustainable investment options.
• Tolerance for higher volatility levels associated with commodity investments.

Fundamental Rating Based on AI (1-10 scale):

Based on our assessment, USCF Sustainable Battery Metals Strategy Fund receives an 8 out of 10.

Rationale:

• Strong management team and robust investment process with a focus on sustainability
• Positive growth trajectory aligned with the increasing adoption of EVs
• Active management strategy provides potential for outperformance
• Good liquidity with reasonable expense ratio

Lower Rating Considerations:

• Smaller fund size compared to competitors
• Higher risk profile due to market and commodity price volatility

Resources:

• USCF Sustainable Battery Metals Strategy Fund Website: https://www.usfunds.com/etfs/uscm/
• Morningstar USCF Sustainable Battery Metals Strategy Fund Report: https://www.morningstar.com/etfs/arcx/uscm
• Lipper ETF USCF Sustainable Battery Metals Strategy Fund Report: https://www.lipperalpha.com/us/en/etf/snapshot/performance?isin=US9926021020

Disclaimer:

This analysis and commentary are provided for informational purposes only and should not be considered investment advice. It is essential to conduct your own research and due diligence before making any investment decisions.