Sprott Critical Materials ETF (SETM)

On our desk, SETM represents a fascinating proxy for the reshoring trade and geopolitical friction. With China controlling roughly 60% to 95% of various refined critical elements, Western supply chain independence is no longer a theoretical debate. However, at a 1.39 beta and a 43% historical max drawdown, you cannot treat this like a passive core holding. While the $500 million domestic push by the Trump administration provides a solid macroeconomic backdrop, I am advising clients to wait for a technical correction or a weekly RSI closer to 30 before deploying fresh capital into these rich valuations.

From a structural risk perspective, SETM's minimal exposure to China is a double-edged sword. On one hand, it insulates the portfolio from direct export embargoes; on the other, it cuts you off from primary refining hubs unless paired strategically with funds like REMX or XME. The underlying basket has performed remarkably well—surging significantly over the trailing year—largely propelled by the AI capex cycle repricing upstream physical inputs. Even so, the 46% annualized volatility means sector correlations will ruthlessly amplify drawdowns during broader market corrections.

As a quantitative researcher evaluating asset allocations, SETM's process and portfolio construction present an interesting puzzle. The fund provides diversified exposure to key energy transition materials like copper, uranium, silver, and lithium across stable jurisdictions including Canada, Australia, and the U.S. Yet, individual commodity dynamics diverge widely: while copper and silver exhibit strong structural momentum and lithium offers attractive relative value, uranium appears stretched. Risk management protocols must account for these internal misalignments rather than treating the ETF as a monolith.