Another check on the number of LTR shares that Van Eck might purchase to match the 4.5% weighting is to look at the total current value of the REMX portfolio and work out how many LTR shares would be purchased with 4.5% of that total value. My calculations on this based on current information comes up with a total of around 41,400,000 LTR shares.
Do your own research to confirm.
This 4.5% weighting would appear to apply at the commencement of each quarterly rebalance period and until the next review this weighting may vary depending on the relative performance of the individual stocks with the portfolio. If you look at the current weightings before rebalance CHINA NORTHERN RARE EARTH GROUP HIGH TECH CO LTD CLASS A has been up at 14.10% but I think Van Eck is now selling that down to bring it back to the new rebalance of 8% for that stock. Something to bear in mind as if LTR moves up well above 4.5% with share price increase then perhaps at the end of the next quarterly review VE might need to sell LTR down because it has performed well over the quarter.
How MVIS calculates as below. The MVIS Global Rare Earth/Strategic Metals Index includes “Refiners”, “Recyclers” and “Producers” of rare earth / strategic metals and minerals. The 8% capping scheme as described in section 3.2.3 is applied to ensure diversification. The components of this index are reviewed on a quarterly basis, and it follows review schedule 1 in section 3.4.1. Target coverage: At least 90% of the free-float market capitalisation of the investable universe with at least 20 companies. Review procedure: 1. All stocks in the investable universe are sorted in terms of free-float market capitalisation in descending order. 2. Stocks covering the top 85% of the free-float market capitalisation of the investable universe qualify for selection. 3. Existing components between the 85th and 98th percentiles also qualify for the index. 4. If the coverage is still below 90% or the number in the index is still below 20, the largest remaining stocks will be selected until coverage of at least 90% is reached and the number of stocks equals 20. 5. In case the number of eligible companies is below 20, additional companies are added by the Index Owner’s decision until the number of stocks equals 20. For all corporate events that result in a stock deletion from the index, the deleted stock will be replaced with the highest ranked non-component on the most recent selection list immediately only if the number of components in the index would drop below 20. The replacement stock will be added at the same weight as the deleted stock. Only in case the number of components drops below its minimum due to a merger of two or more index components, the replacement stock will be added with its uncapped free-float market
3.2.3 Weighting Scheme: 8%-Cap The 8%-cap ensures diversification by assigning weights to components which cannot exceed 8% but still ensures bigger sizes of bigger companies. 1. All companies are ranked by their free-float market capitalisation. The maximum weight for any single stock is 8%. If a stock exceeds the maximum weight, then the weight will be reduced to the maximum weight and the excess weight shall be redistributed proportionally across all other index constituents. This process is repeated until no stocks have weights exceeding the respective maximum weight. 2. The 8%-cap weighting scheme will be applied to the largest stocks and the excess weight after each step shall be redistributed across all other (uncapped) stocks in the index on a proportional basis: • If the largest two stocks exceed 8%, both will be capped at 8%. • If the 3rd largest stock exceeds 7%, it will be capped at 7%. • If the 4th largest stock exceeds 6.5%, it will be capped at 6.5%. • If the 5th largest stock exceeds 6%, it will be capped at 6%. • If the 6th largest stock exceeds 5.5%, it will be capped at 5.5%. • If the 7th largest stock exceeds 5%, it will be capped at 5%.• If any other stock exceeds 4.5%, it will be capped at 4.5%.
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