Junior gold miner ETF gets too big?

• Assets in the VanEck Junior Gold Miners ETF (NYSEARCA:GDXJ) have soared from just over $1B a year ago to $5.4B today. Some of that is due to an 85% gain in the fund, but a rush of money is also at work.
• Since Jan. 1, 2016, inflows have been $3.3B - a lot of money for any fund, but a particularly large amount of dollars to put to work in a niche area like junior gold miners.
• There are now 10 Canadian gold miners in which the GDXJ holds more than 18% stakes. For six of those, the fund's holdings might exceed 20% were it not for a Canadian rule which would force the ETF to automatically extend a takeover offer to all shareholders, according to Scotiabank.
• The fund has also had to do some fancy footwork not to run afoul of U.S. concentration requirements. Among the moves has been to buy names not in the underlying index. GDXJ now has five holdings totaling 25% of AUM that aren't part of the index - among them is another ETF, the VanEck Vectors Gold Miners ETF (NYSEARCA:GDX), which focuses on far larger firms.
• One issue pumping up assets is the Direxion Daily Junior Gold Miners Index Bull 3x Shares (NYSEARCA:JNUG). Scotiabank believes most of the asset growth in GDXJ is the result of hedges for JNUG (where AUM has climbed to over $1B from $100M a year ago).

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