The Wall Street Journal-20080205-Coal ETF Proves Combustible for Investors- Van Eck Fund-s Volatility Since Its Jan- 14 Launch Underscores Sector-s Risks

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Coal ETF Proves Combustible for Investors; Van Eck Fund's Volatility Since Its Jan. 14 Launch Underscores Sector's Risks

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A new exchange-traded fund tracking the coal industry has bounced around considerably in its first couple of weeks in a reminder of the sector's volatility and risk, despite its appeal as a way to leverage global demand for energy.

Van Eck Market Vectors Coal ETF has fluctuated between $32 and $42 a share since its Jan. 14 launch on the NYSE Arca electronic arm of the New York Stock Exchange.

Coal stocks had been performing well leading up to the introduction of the coal ETF. Although oil's rise has dominated headlines in the energy sector, coal usage has been surging. China, India and other developing countries are spurring demand for coal, and China, in particular, is ramping up plant construction. Coal also provides about half of the electricity used in the U.S.

Meanwhile, the industry continues to develop technologies that could allow coal to burn cleaner, reducing carbon emissions and environmental damage.

The Van Eck fund, which has an expense ratio of 0.65%, tracks the return of the Stowe Coal Index. Unlike some other commodity ETFs, the fund isn't designed to track actual coal prices, but rather stocks. The benchmark is managed by Stowe Global Indexes LLC, a partnership between Stowe Partners LLC (a consulting and asset-management company specializing in commodities) and index developer S-Network Global Indexes LLC.

"It's very clear that we're at an inflection point in coal that is greatly tied to international factors," said Joseph LaCorte, chairman of the Stowe Coal Index Committee. He pointed to the high price of oil, expected consumption from China and India, and global economic development.

He said coal produces about 25% of the world's energy and accounts for 40% of global energy consumption.

"While it's certainly not a green-energy source, coal is not as dirty as it once was," Mr. LaCorte said.

The Stowe Coal Index contains 60 companies world-wide that derive at least half of their revenue from coal. For example, some huge mining companies don't make the cut because a small percentage of the business is in coal.

About 60% of the index is in non-U.S. stocks, and a dozen foreign countries are represented, many in Asia. Top holdings are PT Bumi Resources, Consol Energy Inc., Peabody Energy Corp., China Shenhua Energy Co. and China Coal Energy Co.

The ETF's manager, Van Eck Global, oversees nine stock ETFs and two municipal-bond offerings. The New York firm has launched some of the more imaginative and concentrated ETFs in recent years, including a Van Eck Market Vectors Agribusiness ETF, a Van Eck Market Vectors Gaming ETF and a Van Eck Market Vectors Steel ETF.

Legg Mason Taps Dewhurst

As Chief of Global Assets

Mutual-fund and money manager Legg Mason Inc. said it has named Ronald Dewhurst as head of international asset management.

Most recently, the former J.P. Morgan Chase & Co. executive was chief executive officer of I00F, an investment-management company in Australia. Legg Mason, of Baltimore, said Mr. Dewhurst would be a senior managing director and focus on "accelerating the expansion of Legg Mason's business outside the U.S." He will have offices in London and Melbourne, Australia. Mr. Dewhurst will join the firm Monday.

Dodge & Cox Reopens

Two Funds Closed Since '04

Effective yesterday, Dodge & Cox Stock Fund and Dodge & Cox Balanced Fund were reopened to new investors. Both had been closed to new investors in 2004, but, as is typical with such closures, have remained open to additional investment from existing shareholders.

The two funds were closed due to an acceleration in new money coming in. "Closing these funds was successful in slowing the pace of growth," Dodge & Cox said, "though cash flows into the funds generally remained positive through mid-2007 as existing shareholders added to their accounts."