GDXJ became so popular that holdings of some companies were bumping up against 20% ownership. Faced with these problems, GDXJ chose to dramatically alter the composition of the underlying index that GDXJ is supposed to track. In early April 2017, VanEck Vectors Junior Gold ETF announced to modify its rules to include larger companies on or around June 17, 2017.
Attachment 1 shows the potential reductions. One column states the estimated Index weight change and the next column the estimated new Index weight. Attachment 2 shows the additions to the Index.
The massive reshuffling meant that many of the
forecasted index flows represent 10+days of average
volume for some stocks, hence huge! Traders have been beaten the stocks coming out of the index with an ugly stick. One of Toronto-Dominion Bank (TD) Index specialist described the rebalance as "the single greatest wealth destruction event in index history".
Attachment 3 shows on average stock additions lost 3.3%, reductions -15.7% and GDXJ -16.1%. Attachment 4 shows how investors dumped the GDXJ ETF. The real picture, however, looks even worse. The last column of Table 9 shows the price changes from April 12 (date of the announcement of index changes to May 31st, 2017). As can be seen the share price of many gold companies declined between 25% to 30% (last column - Price Change). And this during a period gold prices were slightly up.
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