The latest fund tip, hand-picked by our Investment Guidance team
Fund of the Month August
Our Fund of the Month for August is Ninety One Global Gold (accumulation)
Gold has hit record highs in recent weeks, surpassing previous levels that have stood since July 2011. Despite costing $1,900 for one troy ounce, investors can still gain exposure to it through other means such as funds that invest in gold miners, and ETFs which track the price of the metal.
The reason for gold’s rally is due to it being a safe haven for investors, particularly with the ongoing uncertainty regarding coronavirus and US-China tensions. Currently, gold miners are looking very cheap and the dollar weakness we are seeing means a strong case for gold investing still stands.
However, investors should be cautious of its lofty price and should only consider taking a small overall exposure to gold within a well-diversified portfolio.
Reasons to buy
- The fund invests in companies exposed to gold mining, which tend to have a higher degree of liquidity than investing directly in the physical product itself.
- Annualised returns over 3 and 5 years are greater than those delivered by the benchmark.
- The manager has a wealth of experience at both financial and industry level and is supported by a strong commodities and resources team.
- The fund can be used alongside an exchange traded commodity (ETC) which provides direct exposure to the price of gold such as Invesco Physical Gold.
Things to be wary of
- The fund is not a direct proxy for the price of gold as it holds a much broader range of companies in the mining and natural resources industries.
- Investors must be aware of the high degree of risk that comes with investing in gold and in particular gold miners, which can be even more volatile.
- The fund will be exposed to the impacts of currency fluctuations as well as political, inflationary and interest rate risks.
About the fund
Launched in 2006 the fund is currently managed by George Cheveley, who is ably supported by a strong commodities and resources team at Ninety One. George has been lead manager since 2015 and brings a wealth of both financial and industry level experience specialising in mining and metals.
The approach to investing is one which analyses a company’s overall financial health through its financial statements and the products and services offered – otherwise known as bottom-up investing. It is an unconstrained approach, meaning the manager doesn’t have to match or remain close to a relevant benchmark. Individual stock selection is driven by George’s belief that company share prices are determined by characteristics over time such as: strong balance sheets and high returns on investment capital.
Having undertaken a thorough analysis and appraisal of the commodity arena and individual companies, the team will then appraise the external market forces and leading indicators, with the eventual outcome being the portfolio construction and appropriate weightings for the investments.
Portfolio positioning and performance
The portfolio itself is run on a concentrated basis, with the number of individual holdings generally between 20 and 40. By the very nature of running a high concentration, investors should not be surprised to see some holdings having nearly 10% weighting within the portfolio - as this clearly demonstrates their conviction in that holding.
The fund is primarily weighted towards gold, as expected, but has exposure to silver (c.4.6%) as well which has also enjoyed an impressive rally in recent weeks. Relative to its benchmark it is overweight gold and equal-weight silver. The top ten holdings make up c.60% of the overall portfolio, displaying the high degree of concentration, whilst the largest regional allocation is to Canadian miners in absolute and relative terms.
With regards to performance, the fund has delivered respectable performance in recent years, with an annualised total return of around 33.6% over 5 years – however this can easily change with the current market volatility. It has also managed to outperform its benchmark, NYSE Arca Gold Miners, and has delivered very respectable risk-adjusted returns compared to its peers over a 5 year period. However, investors must be aware that a strategy like this is very volatile, so it’s important to hold over the long term as part of a well-balanced portfolio.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.