A New ETF Of ETFs For Diverse Asset Allocation

A new exchange traded fund aimed at providing diverse asset allocation while limiting volatility debuted Tuesday. The VanEck Vectors Real Asset Allocation ETF RAXX provides exposure to real assets using the ETF-of-ETFs model.

RAXX “seeks to maximize real returns while seeking to reduce downside risk during sustained market declines by allocating primarily to exchange-traded products that provide exposure to real assets, which include commodities, real estate, natural resources and infrastructure,” according to VanEck.

The new ETF debuted holding 10 other ETFs, six of which are VanEck funds. RAXX can hold up to 12 ETFs and can go to 100-percent cash in the event of elevated market stress.

The RAXX Report

RAXX allocates over half its weight to just two ETFs: the PowerShares Optimum Yield Diversified Commodity Strategy No K-1 Portfolio PDBC and the VanEck Vectors Agribusiness ETF MOO.

The actively managed PDBC features exposure to a broad basket of commodities, including West Texas Intermediate crude, Brent crude, wheat, natural gas, zinc, aluminum, corn, soybeans, gasoline and gold. Speaking of gold, the SPDR Gold Shares GLD and the iShares Gold Trust IAU, the two largest gold ETFs, combine for about 20 percent of RAXX's roster.

RAXX holdings “provide exposure to agribusiness, coal, infrastructure, real estate, steel, oil services, unconventional oil and gas and gold mining companies, as well as diversified commodity futures exposure and physical gold,” according to VanEck.

Income And Adventure

RAXX provides some income-generating potential with modest exposure to master limited partnerships via an almost 5-percent weight to the Global X MLP&Energy Infrastructure ETF MLPX.

The new ETF also debuted with some higher beta sector and industry plays, including the VanEck Vectors Oil Services ETF OIH and the VanEck Vectors Gold Miners ETF GDX.

“RAAX performance is dependent on the performance of underlying funds and is subject to the risks of the underlying funds’ investments,” according to the issuer.

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Todd Shriber owns shares of IAU.