Given the knocks to equity markets in recent times, it might seem like a perfect stage for a precious metal fund to launch, capitalising on the usual flight to safety of investors to gold for instance. However, speaking to Dr Paul Jourdan (pictured), founder of Amati Global Investors, about the firm’s new Strategic Metals Fund, it’s a far more nuanced product than simply catching investors seeking safe havens.
As Dr Jourdan admits, there are times when metals such as gold can act as a hedge against certain things, for instance it can counter inflation, which may rise given the amount of monetary stimulus being introduced to the markets.
However, although the fund currently has a majority holding of gold miners (this product targets the producers rather than the metal itself), it has a wide range of metal miners in its high conviction 45 holdings.
“We wanted to put together a fund in the mining sector that would be something that you could hold for the long term so it needs to be something that can work in all market conditions,” Dr Jourdan told Fundeye.
Some of the metals the fund contains have not received particularly good press, for instance cobalt mining has been linked to child labour in countries such as the Democratic Republic of Congo. While this metal is needed for numerous products from smart phones to electric cars, many investors would baulk at the idea of being involved in an industry that neglects human rights.
Dr Jourdan is a trustee of Clean Trade, a charity that is aware there are some countries in the world which are governed by dictators who stay in power by exploiting their countries’ natural resources which although is usually oil can include hard commodities as well, to the detriment of their citizens.
He explained how the process worked for mining companies to be selected: “there's a threshold, which if you go below it, your mining project has no chance of making any positive impact it's only going to make a negative one. And that's the trade, it is about making sure we don't go below that threshold”.
The fund will be managed by Georges Lequime and Mark Smith of London Investment Consultants, who are already at the helm of gold fund domiciled in Switzerland. According to Dr Jourdan, the pair understand how metal markets work and the cyclical nature of precious metals in particular.
There are plenty of passive products that touch this space, gold backed ETFs for instance. However, Dr Jourdan told Fundeye that he’s against passives in this sector as they don’t “distinguish between good and bad practice in the sector which we can”.
With the increasing transition to a low carbon economy, which this fund aids with its mining of lithium another necessity for batteries, it seems to have many bases covered. The metals which are deemed unpalatable to a broader investor base should be covered by the firm’s adherence to the Clean Trade agenda.
