CRAK is a global fund
The VanEck Vectors Oil Refiners ETF (CRAK) offers uncomplicated exposure to global oil refiners. CRAK, launched in August 2015, has no direct peers in the global oil sector.
CRAK is not only an American player. The world’s largest refiners comprise 18 of CRAK’s 26 top holdings. More than half of its portfolio offers international exposure, with funds based in India, Japan, Finland, Turkey, Australia, South Korea, Thailand, Greece, Poland, Taiwan, and Portugal.
Benefits of global diversification
Refineries are currently enjoying varying degrees of profitability around the world. Geographic location affects input prices for refineries, as input prices depend in part on how close a given refinery is to import or export terminals.
With more than half of CRAK’s stock holdings based outside the United States, investors are able to mitigate concerns about the effect of refinery proximity on input prices.
CRAK provides investors with broad global exposure, diversifying its portfolio with developed markets as well as emerging markets like Japan and India.
Currency risk due to international exposure
Currency risk is a form of risk that comes from a change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions aren’t hedged.
Because of CRAK’s global exposure, the fund may face some currency risks. However, its US holdings, including HollyFrontier (HFC), Western Refining (WNR), Marathon Petroleum (MPC), Tesoro (TSO), Phillips 66 (PSX), and Valero Energy (VLO), should help mitigate the risks.
Greece’s economic slowdown has certainly had a negative effect on CRAK, but its holdings in emerging markets such as India should help counterbalance this issue.
In comparison, the Energy Select Sector SPDR ETF (XLE) only has holdings in the United States and the United Kingdom.