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CRAK Offers Exposure to Crude Oil Refining Companies

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Van Eck Global: An overview

Van Eck Global, an investment management firm, was founded in 1955. The firm offers innovative investment choices in specialized asset classes such as hard assets, emerging markets, and precious metals, including gold.

Van Eck offers a broad array of VanEck Vectors ETFs spanning broad-based and specialized asset classes. It’s one of the largest global providers of ETPs (exchange-traded products). As of June 30, 2015, it managed approximately $31.1 billion in investor assets.

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CRAK tracks the performance of global refiners 

Van Eck Global launched the VanEck Vectors Oil Refiners ETF (CRAK) on August 18, 2015. According to Van Eck’s prospectus, CRAK is a modified market cap-weighted index intended to track the performance of the largest and most liquid companies in the global refining segment.

CRAK provides a good option for investors who want exposure to the energy sector but don’t expect energy prices to rise anytime soon.

CRAK offers exposure to refiners

According to Van Eck Global, many energy portfolios may lack significant exposure to refiners even though this segment of the energy sector may offer differentiated exposure. As we can see in the chart above, oil refiners’ performances were distinct from other energy segments, as oil prices fell in late 2014 and remained weak in the first half of 2015.

Lower crude oil prices result in lower input prices for refiners. This allows them to achieve higher margins.

CRAK’s focus on refiners makes them a good current option for investments in the energy sector.

Refiners stand out from other energy sector sub-industries

Over the last year, the refining sector has been the only energy sector sub-industry to post a positive return, at 13.7%. Every other sub-sector has registered a negative total return.

Lower crude oil prices benefit refiners like Marathon Petroleum (MPC), Valero Energy (VLO), Phillips 66 (PSX), and Tesoro (TSO). However, it’s bearish for oil producers such as Hess (HES), Cimarex Energy (XEC), and Triangle Petroleum (TPLM) and for ETFs such as the Energy Select Sector SPDR ETF (XLE).

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