| For investors seeking safe haven assets, sovereign bonds have become a ‘no-go’ area due to the preponderance of negatively yielding govies (Swiss bonds are negative out to 50 years). Fundeye has reported that wealth managers have sought safety in gold but apart from the impracticalities of holding large amounts of the shiny yellow substance physically, what is the best way to play this asset class?
Insh Kintore developed a product around five years ago which uses gold for what are in essence currency swaps. The fund is an absolute return strategy which trades rolling spot gold price versus major currencies. The program is “trend following” in nature and fully automated in terms of trade implementation and execution. Buy and sell signals are generated from price breakouts, volatility and other proprietary signals. Aside from the obvious lack of correlation with the equity and bond markets, the fund has performed well since its inception due to currency fluctuations. The ‘gold as a currency’ approach has outperformed the S&P 500 as well as gold funds as its founder Chris Crudden told Fundeye “I don’t care which way the price of gold is moving” suggesting that if gold is in decline, the fund will short the commodity in favour a currency and do so automatically. The fund’s average annual return during its five year history has been 13.5 percent, compared to 10.1 percent of the S&P 500 and 3.88 percent of SPDR’s Gold ETF which returned 3.8 percent annualised. Given the portfolio and the instruments traded, Kintore is able to offer daily pricing and liquidity, an important consideration in a climate of open-ended funds being accused of liquidity mismatches regarding holdings and frequency of dealing. This is not the only product from Insh Capital, it launched a long only gold fund in December 2009 called Goldilocks. However, it is the Kintore fund’s ability to be agnostic to the price of gold which has driven its performance, shorting the commodity when the price is falling. |
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