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Silver Mining ETFs Head to Head: SLVP vs. SIL

Precious metals are back to business now owing to the recent spate of disappointing economic data, mainly from the U.S. and China. After the weak September U.S. job data, the most recent inflation data from China and retail sales and producer prices data from the U.S. jumpstarted the rally in precious metal prices (read: Precious Metal ETFs Regain Shine: Will it Last?).
Consumer price index (“CPI”) in China rose 1.6% year over year in September, lower than the August gain of 2%. The producer price index (“PPI”) declined 5.9% in the same month after falling by the same magnitude in the previous month. With this, it recorded its 43rd straight month of decline. On the other hand, U.S. retail sales gain of 0.1% in September was lower than expected (0.2%) while producer price index was the lowest since January at 0.5% in the same month, after remaining unchanged in August.
Further, International Energy Agency (“IEA”) recently predicted that the global oil market will remain oversupplied in 2016 due to the surge in Iranian oil supply following a nuclear deal and weak global demand. This will continue to put pressure on oil prices and result in subdued inflation across the world due to lower oil consumption bill.
All these data dimmed the prospect of an interest rate hike by the Fed, at least in 2015, leading people to flock toward non-yielding assets such as gold and silver. The chance of a delay in rate hike also led the U.S. dollar to tumble to its lowest level since late August against a basket of major currencies. This has further strengthened the demand for gold and silver in the global market as a weaker dollar makes them cheaper for holders of other currencies. As a result, both gold and silver hit their three-and-a-half-month highs recently (read: What is in Store for Industrial Metal ETFs After China Rout?).
Amid the bullish price trend for silver, it would be intriguing to look at two top performing silver mining ETFs and their key differences (see all Materials ETFs here).
iShares MSCI Global Silver Miners (SLVP)
This ETF tracks the price and yield performance of the MSCI ACWI Select Silver Miners Investable Market Index, which provides exposure to companies primarily engaged in the business of silver mining in both developed and emerging markets. The fund holds 30 stocks in its basket. Canadian firms dominate the fund’s portfolio with a 59.08% share, followed by U.K. (12.44%) and the U.S. (9.99%).
Silver Wheaton Corp. (SLW), Fresnillo Plc (FNLPF) and Industrias Peñoles occupy the top three positions in the basket with shares of 21.96%, 10.02% and 8.04%, respectively. The top 10 holdings comprise 71.42% of the fund. Notably, the fund has some exposure to the broader precious metals and minerals sector (29.18%) and gold (10.26%), apart from silver (60.49%).
The product has amassed over $13.5 billion in its asset base and trades in a paltry volume of around 15,000 shares a day. It charges investors 39 bps in fees per year and has a dividend yield of 2.87% (as of October 14, 2015). The fund returned 23.6% in the past one month.
Global X Silver Miners ETF (SIL)
This ETF follows the price and yield performance of the Solactive Global Silver Miners Index, measuring the performance of the silver mining industry. The fund holds 24 stocks in its basket. Industrias Penoles Cp, Silver Wheaton Corp. and Silver Standard Resources Inc. (SSRI) are the top three holdings of the fund with allocations of 11.19%, 10.11% and 7.52%, respectively.
The top 10 holdings account for 65.76% of the fund’s assets. The ETF is also highly focused on Canadian firms with a 57.96% share, followed by the U.S. (12.34%) and Mexico (11.15%).
SIL has gathered about $154 million in assets and trades in an average volume of more than 238,000 shares. It charges 65 bps in fees from investors per year and offers a dividend yield of only 0.09%. The product was up 25.4% over the last one month (read: Precious Metal Mining ETFs Head to Head: GDX vs. SIL).
Exposure: In terms of company and country exposures, both funds stand on the same foot. However, SLVP has an edge over SIL as the former is also exposed to gold and the broader precious metal and minerals mining sector.
Concentration: SLVP holds more securities than SIL and is more concentrated in its top 10 holdings.
Volume: The higher volume of SIL compared to SLVP suggests that the former is much more liquid and its bid/ask spread should be relatively tighter than the other.
Cost and Yield: SLVP is cheaper than SIL and has a much higher dividend yield.
Therefore, investors keen or riding the bullish trend in silver prices should take note of these points before choosing between the two popular silver mining ETFs.
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ISHARS-M GL SLV (SLVP): ETF Research Reports
GLBL-X SILVER (SIL): ETF Research Reports
SILVER WHEATON (SLW): Free Stock Analysis Report
FRESNILLO PLC (FNLPF): Free Stock Analysis Report
SILVER STD RES (SSRI): Free Stock Analysis Report
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