The silver market has experienced a historic rally, with the precious metal nearly tripling since the start of 2024. As investors seek to capitalize on this trend, they are faced with two distinct options: the Abrdn Physical Silver Shares ETF (SIVR) and the iShares MSCI Global Silver and Metals Miners ETF (SLVP). These two funds offer different approaches to silver exposure, with SIVR providing direct access to physical bullion and SLVP targeting the equity performance of companies involved in silver extraction.
Physical Silver ETF: SIVR
The Abrdn Physical Silver Shares ETF is a commodity-focused fund that holds physical silver bullion in secure vaults. As a result, its sole position is physical silver at 100%, and the fund seeks to track the spot price of the metal. Launched in 2009, SIVR has a lower expense ratio of 0.3% compared to SLVP's 0.39%. The fund also boasts a larger assets under management (AUM) of $4.6 billion, making it a more established and liquid option.
Silver Mining Stocks ETF: SLVP
In contrast, the iShares MSCI Global Silver and Metals Miners ETF provides exposure to the Basic Materials sector, specifically companies involved in silver and metal mining. With 35 positions, SLVP currently holds a diverse portfolio of mining companies, including Hecla Mining (13.1%), Indust Penoles (11.9%), and First Majestic Silver (9.6%). Launched in 2012, SLVP has a slightly higher expense ratio but has outperformed SIVR in the long term.
Key Differences and Considerations
While both funds are influenced by the price of silver, they have distinct characteristics that set them apart. SIVR is a pure play on the price of silver, whereas SLVP is a mining stock ETF that tracks the physical metal prices closely. A benefit of owning mining stock ETFs like SLVP is that when silver prices rise, they usually outpace operating costs, resulting in higher returns to shareholders. Additionally, mining companies can make decisions that boost returns to shareholders, such as increasing dividends or merging with another miner.
Performance Comparison
Over the last five years, SLVP has shown a shallower maximum drawdown of (47.7%) compared to SIVR's (52.3%). Furthermore, the mining-focused approach has produced a higher total growth of $3,328 on a $1,000 initial investment over that period. However, SLVP exhibits higher sensitivity to broader market volatility as indicated by its beta. Year-to-date, SLVP has a positive 7.6% return while SIVR has a negative 7.4% return.
Conclusion and Next Steps
Investors seeking exposure to the silver market have two distinct options: the Abrdn Physical Silver Shares ETF (SIVR) and the iShares MSCI Global Silver and Metals Miners ETF (SLVP). While SIVR provides direct access to physical bullion, SLVP targets the equity performance of companies involved in silver extraction. Investors should consider their risk tolerance, investment goals, and time horizon when deciding between these two funds. As the silver market continues to experience a historic rally, it is essential to monitor the performance of both funds and adjust investment strategies accordingly.
