Van Eck Launches Hard Assets ETF

The fund has 321 holdings. The top 10 make up 33% of the fund. The ETF's top three holdings: Monsanto(MON Quote), Potash Corp. of Saskatchewan (POT Quote), and Exxon Mobil(XOM Quote), make up close to 15% of the fund. A misstep by any of these three could be a drag on the fund's performance.

The expense ratio of the Market Vectors Hard Asset Producers ETF is capped at 0.65%, the index yield is 1.59% (less the fee implies a yield for the fund of just under 1%) and 88% of the fund is in large-cap stocks.

The back test, not surprisingly, has been very volatile relative to the broader markets. The standard deviation of the index has been running at 17.19 for the last five years compared with just 9.47 for the Standard & Poor's 500. Some sectors, like utilities, are used to reduce volatility while other sectors, such as natural resources, are often used to add volatility. That the fund likely will be volatile isn't bad. I believe its volatility must be accounted for when adding it to a diversified portfolio. The volatility expected from HAP isn't much different than any other fund that focuses on the resource portion of the materials sector.

An exact comparison of HAP's back test with similar funds isn't easy but a close comparison can be made. For the year through July 30, HAP's back test returned 20.56% versus 5% for iShares S&P Global Materials Sector Index Fund (MXI Quote), and break even for WisdomTree International Basic Materials Sector Fund (DBN Quote).

The three-year number for HAP's back test also goes through July 30, and averages 28.75% a year compared with three-year numbers of 34.05% for MXI, and 34.58% for DBN. The three-year numbers for MXI and DBN are through June 30, and the numbers for DBN include a reinvested dividend from the back test that the fund may not be able to duplicate.