Palladium ETF tops US$100M in AUM for the first time

A substantial influx of interest from institutional investors and wealth management allocations has pushed the Global Palladium fund (GPF), an exchange-traded fund created by Russia’s Norilsk Nickel, above US$100 million in assets under management (AUM) for the first time.

The Zug, Switzerland-based fund has achieved a record US$109 million in AUM, driven in part by strong demand for investments linked to the green energy transition and electric vehicle adoption, said the fund in a press release.

The GPF has seen solid flows into its unique Physical Copper, Physical Nickel and Physical Carbon Neutral Nickel products, as well as its Physical Gold ETC, which is Europe’s cheapest with a 0.12% management fee.

“Investor appetite for targeted, real-asset exposure to the low-carbon economy transition has jumped massively in the last 12 to 18 months, and with that, we’ve seen steadily increasing interest in the key metals underpinning the technology and infrastructure vital to making the world’s greener future a reality,” said the fund’s CEO, Alex Stoyanov.

The GPF reports it has seen strong interest in its Physical Copper ETC. Like its Nickel products, it is the only physically backed exchange-traded commodities for both metals available to investors today.

Allocations have grown as investors increasingly value a hard-asset approach to investing in metals. These ETCs offer better tracking and lower total cost of ownership compared to synthetic alternatives.

The institutional-only Carbon Neutral Nickel ETC has also proved popular. Launched earlier this year, the product is backed by metal mined using majority renewable energy and paired with internally generated carbon credits to achieve a neutral carbon footprint.

The fund’s business development head, Timothy Harvey, said most companies that could benefit from the green transition exhibited significant correlation to the broader equity market, and as such, didn’t offer pure or reliable exposure to the megatrend.

“Investors are starting to look much more closely at metals in this context, and we are seeing a rapid evolution in terms of the sophistication with which they are approaching the asset class, particularly when it comes to understanding the importance of physical metal products compared to synthetic alternatives.”

The palladium price has been trending lower in recent weeks.

In Nornickel’s eighth review of the nickel and platinum group metals markets, prepared with ICBC Standard Bank, the miner said the automotive market failed to recover. The industry’s underperformance affects the palladium market more significantly than the platinum market. Palladium use is heavily concentrated in this industry, and demand recovery in other sectors could provide only partial relief.

The primary supply of palladium added more than 500,000 ounces this year mainly due to the recovering production in South Africa and the release of work-in-progress material accumulated by Anglo Platinum and other African producers.

“These additional ounces were sufficient to offset the lower output in Russia completely. All this moved the market balance towards a mild deficit of 0.2 Moz this year. However, even the lower deficit didn’t prevent the palladium price from reaching a new historical high,” Nornickel said.

In 2022, Nornickel expects the electronic chip supply to recover in the second half of the year, but automotive production will still struggle to return to the pre-Covid levels until 2023. Considering the improving Russian supply, it is expected that the palladium market will be in a deficit of 300,000 ounces in 2022.