Andy Parsons, advice team manager at The Share Centre, explains how investors looking for exposure to gold and other precious metals without wishing to purchase the assets, could benefot from the Investec Global Gold Fund. 

The fund aims to achieve long-term capital growth primarily through investment in equities issued by companies around the globe involved in gold mining. However, despite the name the fund does not solely invest in gold. At least two thirds of its total assets are invested in companies that are involved with the mining of other precious metals and minerals such as platinum, silver and diamonds.

As an asset with inherent value and tightening supply, gold is likely to appeal to investors concerned about uncertainty such as the risk of inflation, instability caused by fluctuating oil prices, global economic imbalances and geographical uncertainty.

The fund is overseen by Bradley George and Daniel Sacks who take a bottom-up approach to investing. Individual stock selection is driven by their belief company share prices are determined by characteristics over time. The managers look for a strong balance sheet with high returns on investment capital. This approach will mean the managers are not as concerned with company performance in relation to the forecast economic landscape.

Sacks believes the increased purchasing of gold by emerging market central banks and governments will continue to support prices. Gold has finally broken clear of the 1000/oz range that has dominated the last two years. As a result, new parameters have been established and when harnessed with the increasing degree of investment demand, Sacks believes a peak nearer $1300/oz over the next six months is possible, with $1000/oz now becoming the long-term floor.

When investors choose to invest in natural resources, one of the key decisions they need to make is whether they wish to invest indirectly via companies involved with the overall operations, or directly via the physical commodities themselves. Investec’s fund is suitable for those investors that wish to have some form of commodity exposure within their portfolio without having to invest directly within the commodity.