CRAK has been designed to benefit from crack spreads
According to Van Eck, crack spread, otherwise known as the difference between the price of crude oil and its refined products, is a common indicator of the potential profitability of the refining industry. Unlike other energy sector segments, oil refiners may benefit from lower oil prices if crack spreads remain attractive.
This would have a positive impact on the VanEck Vectors Oil Refiners ETF (CRAK), as the fund is concentrated on oil refining companies.
Van Eck estimates that expenses for CRAK will run $6.40 per $1,000 invested, or 0.64%, with a net expense ratio of 0.59%. Van Eck has agreed to cap expenses until May 1, 2017, in order to gain investors’ interest in the new ETF.
CRAK is a relatively new fund, and liquidity concerns should be considered given its smaller asset base and lack of trading volume to date. CRAK only has about $1.8 million in total assets. It has traded ~8,000 shares per day since launching in mid-August. CRAK’s low asset count and share volume mean the fund needs to prove itself to investors.
VanEck Vectors ETFs have been successful with two energy ETFs, the VanEck Vectors Oil Services ETF (OIH) and the VanEck Vectors Unconventional Oil & Gas ETF (FRAK). These successes could certainly help garner investor interest as well as asset count and share volume.
CRAK’s pure play on refineries
CRAK joins Van Eck Global’s family of energy-focused ETFs, which includes the VanEck Vectors Uranium & Nuclear Energy ETF (NLR), the VanEck Vectors Unconventional Oil & Gas ETF (FRAK), the VanEck Vectors Global Alternative Energy ETF (GEX), the VanEck Vectors Solar Energy ETF (KWT), the VanEck Vectors Coal ETF (KOL), and the VanEck Vectors Oil Services ETF (OIH).
CRAK’s basket meets a reasonable definition of pure-play refinery exposure in an investable wrapper. CRAK’s holdings in US top refiners include HollyFrontier (HSC), Western Refining (WNR) Marathon Petroleum (MPC), Phillips 66 (PSX), Tesoro (TSO), and Valero Energy (VLO). The Energy Select Sector SPDR ETF (XLE) has 28.12% holdings in the Oil & Gas Exploration & Production industry.