VanEck’s TruSector ETFs are designed to deliver full market-cap sector exposure and help asset allocators track sector benchmarks with greater precision by overcoming the allocation caps imposed on traditional sector funds.

VanEck is announcing the launch of two actively managed ETFs built to solve one of the most persistent issues in sector investing: the tracking error caused when Registered Investment Company (RIC) diversification rules force sector funds to underweight the largest companies in their benchmarks.

The VanEck Consumer Discretionary TruSector ETF (TRUD) and VanEck Technology TruSector ETF (TRUT) are designed to give investors full market-cap sector exposure, providing closer alignment with how the market itself defines each sector.

RIC rules limit how much an ETF can invest in any single company—for example, funds cannot hold more than 25% in a single stock and stocks with a 5% weighting or more cannot make up more than 50% of the portfolio. In sectors dominated by a few large names, such as Technology where NVIDIA and Microsoft alone can make up over 40% of the sector, these limits require traditional sector funds to scale back exposure to the biggest companies. This distorts sector weightings and increases the potential for performance differences when compared with uncapped benchmarks.

“Many investors assume that sector ETFs fully mirror the broad relative benchmarks, but RIC diversification rules often prevent that,” said Michael Cohick, Director of Product Management at VanEck. “Our new TruSector ETFs are designed to provide full sector exposure while staying within regulatory limits.”

VanEck’s TruSector ETFs offer uncapped sector exposure while maintaining compliance with RIC diversification rules by adopting a hybrid approach, holding a mix of individual equities and targeted ETFs. By doing so, the funds can maintain uncapped exposure to the sector’s leading contributors and avoid the overallocation to smaller names common in traditional sector ETFs. This results in cleaner attribution, lower tracking error to widely followed benchmarks and no unintended stock biases.

“By removing artificial caps and keeping sectors aligned with the market leaders, the TruSector ETFs provide asset allocators and model portfolio managers with precision tools for tracking sector benchmarks,” Mr. Cohick added. “They simplify the process of gaining true sector exposure in a single, liquid, tax-efficient ETF wrapper.”

The launch of the TruSector ETFs follows VanEck’s recent commemoration of its 70th anniversary earlier this month, marking another milestone in the firm’s long history of delivering intelligently designed solutions that address structural gaps in the investment landscape.

Source: VanEck