VanEck aims to eliminate one of the industry’s most significant headaches in investing: tracking error.
The asset manager launched two actively managed ETFs on Aug. 21 that aim to replicate sector benchmarks by eliminating artificial limits on leading holdings.
The VanEck Consumer Discretionary TruSector ETF (NASDAQ:TRUD) and VanEck Technology TruSector ETF (NASDAQ:TRUT) aim to provide “full market-cap sector exposure,” the company states. Conventional sector ETFs tend to run afoul of Registered Investment Company (RIC) diversification regulations, which impose limits on positions in big constituents—no more than 25% in one stock and a 50% limit on holdings exceeding 5%.
Also Read: Defiance Rolls Out Leveraged ETFs Targeting AMD, Supermicro, Palantir, Hims & Robinhood
That structure can introduce distortions in a few concentrated industries. In the tech sector, Nvidia Corp (NASDAQ:NVDA) and Microsoft Corp (NASDAQ:MSFT) collectively account for more than 40% of the market. RIC-compliant funds must underweight such stocks, which can induce performance differentials relative to uncapped benchmarks.
The capital seeks to transcend those boundaries by holding a combination of individual stocks and specialized ETFs, enabling larger bets in industry leaders without overexposing itself to smaller firms. VanEck asserts that this hybrid model provides lower tracking error, purer performance attribution, and stronger alignment with market references.
VanEck is not finished yet. Only days after introducing the TruSector ETFs, the company also announced plans to transform its flagship Emerging Markets Bond Fund from a conventional mutual fund into an actively managed ETF. The transition, which will take place approximately on Oct. 6, aims to enhance investor access through intraday liquidity, increased transparency, and tax efficiency, while maintaining the fund’s high-conviction, bottom-up approach that has delivered robust risk-adjusted performance against its benchmark.
VanEck oversaw approximately $135.8 billion in assets as of July 31, across mutual funds, ETFs, and institutional portfolios. The new fund’s debut comes as VanEck celebrates its 70th anniversary this month, highlighting the company’s drive to tackle structural issues in portfolio construction.
Read Next:
Image: Shutterstock
