Soaring demand for electric vehicles has led to a bull run in battery metals and some exchange-traded funds are cashing in. The manager of an ETF that has an average annualized return of over 100% explains where he thinks the opportunities are looking ahead. Jay Jacobs is head of research and strategy at Global X, a U.S.-based ETF provider with over $40 billion in managed assets. He spoke to CNBC about the Global X Lithium and Battery Tech ETF . Set up 11 years ago, Jacobs said the ETF was the first of its kind, providing exposure to the entire lithium and battery space. It has an average annualized return of 113.15%, as of the end of October, which reflects its historical average return over a 12 month period. On a cumulative basis -- the ETF is up 47.9% year-to-date; for comparison, the S & P 500 is around 26% higher over the same period. Jacobs attributes the fund's performance to its very targeted exposure to the theme. Once an important metal playing an integral part in batteries for electronic devices, demand for lithium stagnated during the 2010s as a result of China's cyclical downturn and its relatively limited uses. However, the shift toward electric vehicles, sparked by the high-profile launch of the Tesla Model 3 in 2017 and aided by new regulations and incentives from governments, has meant that lithium is experiencing a revival and is now an essential component of the global economy's shift to EVs. "If you buy the S & P 500 you get almost 0% exposure to lithium companies," Jacobs told CNBC earlier this month. "Even if you buy a materials and industrial fund, lithium exposure is limited, and you are then also exposed to other materials which are being disrupted by lithium." The top 5 holdings in the fund include the largest mining and battery production companies in the world: Albemarle , Eve Energy , Tesla, TDK and BYD . Notably, Tesla and Warren Buffet-backed BYD are both battery producers and EV manufacturers. The ETF's top holding, Albemarle — a U.S.-based global chemicals company and the world's largest lithium miner — makes up over 10% of the fund. Jacobs says stocks like Albemarle are undervalued as lithium mining companies "are treated like industrial and material companies, which do not get particularly high valuations in the market." As the third-largest holding in the ETF, Tesla is another important stock for Jacobs. Although the company's shares experienced their biggest fall this year last week, he still sees potential for further returns in the long run. "Being an investor in Tesla, as much as people have doubted it over the past few years, has been a net positive for this fund so we are very happy to keep our position," he added. Despite the lithium and battery tech ETF's strong returns so far this year, Jacobs argues there's more to come as lithium remains undervalued. "Electric vehicles use 10,000 times more lithium than a smartphone, and the acceleration in EV demand coupled with costs coming down means we are on the verge of entering an undersupply in the market which will only push the price higher," he added. Uranium Another fund that has outperformed of late is the Global X Uranium ETF, which Jacobs puts down to the surge in thematic investing. "People used to use sector funds to express opinions on what's happening in the economy, but now they are increasingly realizing that these funds are not the best way to play cyclical trends as the exposure is not precise enough," he added. The uranium ETF has an average annualized return of 113.69%, and is up 55% on a cumulative basis year-to-date. Correction: The headline and text of this story has been updated to accurately reflect the returns of the ETFs.
A man attaches a charging plug to a General Motors Co. (GM) Chevrolet 2017 Volt hybrid electric vehicle (EV) at a charging station in Jeju, South Korea.
SeongJoon Cho | Bloomberg | Getty Images
Soaring demand for electric vehicles has led to a bull run in battery metals and some exchange-traded funds are cashing in. The manager of an ETF that has an average annualized return of over 100% explains where he thinks the opportunities are looking ahead.
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