By David Stevenson – Despite all the grim news surrounding gold, I find myself looking afresh at gold mining equity funds and wondering whether now is the time to start quietly increasing my exposure. In essence, investors face two equally dismal choices. Do they focus on investing with an active fund manager who will “know” which miners to back or do they invest in a passive ETF? The second equally lethal choice is whether they should back larger lower-cost miners or junior miners where the rewards could be huge?
‘ Themes and Strategy ’
By David Stevenson – Why are so few investors currently buying into consumer staples sector ETFs? I realise that this isn’t exactly one of those raging questions that ranks up there alongside “should we dump Europe?” and “why, oh, why are most of the singers on The Voice so bloody awful?”, but for investors I think the question really, really matters. To understand why I’m so nonplussed, let’s rewind the investment debate and establish some basic principles. The first and most basic principle is that investors worldwide are fearful about macro risk.
Asset class performance has been very mixed so far this year with currency volatility re-awakened and softening global economic data suggesting more difficult times ahead, according to Stephen Cohen, Head of iShares EMEA Investment Strategy & Insight. So what can investors do? Cohen proposes four strategies: overweighting defensive equities and equity income; using developed market equities to access emerging markets; playing Japan via a currency-hedged solution; and mitigating interest rate risk in fixed income and looking at local currency emerging markets debt.
ETF Securities believes that the commodity super-cycle is far from over, despite recent falls in commodity prices which have wiped billions off the firm’s assets under management. The London-headquartered exchange-traded product (ETP) provider asserts that the main fundamental drivers of the super-cycle are still in force and that recent commodity price weaknesses are more related to business-cycle fluctuations and short-term commodity-specific supply increases than a change in structural fundamentals.
Smart beta is a term that seems to have suddenly emerged out of nowhere to describe the rise of a new form of ‘passive’ investing. The very words themselves conjure up a certain egg-headed technical prowess, implying that all the other beta trackers out there are just “back of the class” dullards, market capitalisation based, one-trick ponies that don’t do all the clever stuff that smart beta trackers can accomplish with their quantitative prowess. Scratch beneath the surface though and we discover a slightly more honest admission by the ETF industry.
Exchange-traded funds (ETFs) linked to frontier markets, such as the db X-trackers S&P Select Frontier UCITS ETF, present an enticing proposition for investors. Inherently a long-term investment opportunity, they not only offer potential for strong returns, but also provide an ideal means of portfolio diversification. With 22% of the world’s population, of which almost 60% is under 30 years of age, abundant natural resources and low labour costs, frontier markets are “too significant to ignore”, says Tim Drinkall of Morgan Stanley Investment Management.
Expectations of a recovery for gold are mixed, according to a survey of Barclays Stockbrokers clients. Just under a third of respondents think the value of gold will bounce back above $1,500/oz in the next six months, while more than a quarter expect it to drop below $1,300/oz. The broker also revealed that the top five traded exchange-traded commodities (ETCs) in the week following the metal’s dramatic fall were all related to precious metals, comprising three gold ETCs – led by ETF Securities’ ETFS Physical Gold (PHAU) – and two silver ETCs.
Stoxx, a leading provider of financial market indices, has introduced the Stoxx Global 3D Printing Tradable Index. The new index tracks the performance of companies that generate revenues directly from 3D printing, described by US President Barack Obama as “the next revolution in manufacturing”. The index has been specifically designed to underlie exchange-traded funds (ETFs) and other investable products, and will enable investors to participate in the performance of the booming 3D-printing industry.
The price of carbon has plunged in value after the European parliament rejected a plan to revive the Emissions Trading System, the European Union’s carbon trading programme, by shoring up the price of emissions permits. The sell-off has been mirrored in exchange-traded products (ETPs) indexed to emissions permits, with ETF Securities’ LSE-listed ETFS Carbon ETC (CARP) down around 43% since the vote and Barclays’ NYSE-listed iPath Global Carbon ETN (GRN) off some 46%.
Exchange-traded funds (ETFs) and related exchange-traded products (ETPs) linked to the inverse performance of the gold price have surged over the past few weeks as the precious metal has tumbled following downgrades from a number of prominent research houses. One of the best performing ETPs in this space is the London-listed Boost Gold 3x Short Daily ETP (3GOS), which provides triple short exposure to the gold price. It is up 48.5% month-to-date on the back of the dramatic sell-off.