US-based exchange-traded fund provider REX Shares has launched two new gold hedged equity funds, giving investors an efficient way to add gold exposure to broad equity holdings. The ETFs provide exposure to US equities and emerging-markets equities, while both also offering long exposure to the gold price through the use of futures contracts.
Greg King, Founder and CEO of REX Shares.
The REX Gold Hedged S&P 500 ETF (NYSE Arca: GHS) tracks the S&P 500 Dynamic Gold Hedged Index. It contains an investment that mimics the return on the S&P 500 Index plus a long position in gold futures contracts, the notional value of which is comparable to the value of the exposure to the S&P 500. The fund is designed to outperform a US large-cap portfolio over the long term if the value of gold increases. Dividends are paid on an annual basis and management fees of 0.48% applies.
The REX Gold Hedged FTSE Emerging Markets ETF (NYSE Arca: GHE) tracks the FTSE Emerging Gold Overlay Index. Similarly the fund’s investment is in a portfolio that tracks the return on the FTSE Emerging Index plus a long position in gold futures contracts, the notional value of which is comparable to the value of the exposure to the FTSE Emerging Index. The fund is designed to outperform an emerging markets equity portfolio over the long term if the value of gold increases. Dividends are paid on an annual basis and management fees of 0.65% applies.
A key benefit of both funds is their ability to cost effectively diversify investors’ portfolios by accessing exposure to gold without reducing equity allocations. Volatility in international equity markets at the start of the year led to investors reallocating their portfolios in favour of safe haven assets such as gold. This resulted in gold achieving its strongest quarterly performance in over 30 years, rising 15.4%. As of 6 April 2016 the S&P 500 Dynamic Gold Hedged Index is up 17% year-to-date and the FTSE Emerging Gold Overlay Index is up 20%.
Greg King, Founder and CEO of REX Shares, said in a statement: “Investors have been increasing their exposure to gold recently. Our new ETFs allow them an unprecedented type of access to the movements in the price of gold without asking them to choose between gold or stocks.”
By diversifying through gold exposure, the funds may also provide a partial inflation hedge as well as protect against the risk of a weakening US dollar.
“With parts of the world experiencing sustained negative interest rates for the first time and the US dollar hitting new highs, investors may want to consider whether they are appropriately positioned for potential market corrections and volatility ” added King.