In Russia, a growing number of retail funds, in which “paper” gold is replaced by real metal. This step allows you to reduce costs through ETF manager fees and conversion transactions. Despite the weak dynamics of prices for the precious metal, managers have recently indicated that it should be present in a diversified investment portfolio in order to smooth out the price dips of other assets in the event of crises.
Management companies began to actively replace foreign ETFs focused on investing in gold with real metal in the portfolios of retail funds. By the middle of the year, the volume of physical gold in six mutual funds exceeded 1.1 tons.
Back in the fall of last year in the BPIF “VTB – Fund Gold. Exchange ”has replaced shares of ETF SPDR Gold Shares with gold bars. As of July 22, the mass of precious metal in the fund exceeded 677 kg. Physical gold is also available in the open unit investment fund Sber-Zoloto (43 kg), but it accounts for less than 5% of the fund’s assets. Since the beginning of the year, Tinkoff Capital has begun replacing shares in the iShares Gold Trust ETF with gold traded on the Moscow Exchange in its BIFs.
By the middle of the year, the volume of gold in four funds reached 460 kg. According to the general director of the company Ruslan Muchipov, it is planned to complete the transfer of funds into real gold during July-August.
Based on the remaining ETF shares, this could add more than 415 kg of the precious metal.
The launch of retail funds with physical metal or the substitution of ETF securities for it in existing ones is being considered by Alfa Capital, RSHB Asset Management, Raiffeisen Capital, Otkritie Management Company. According to Vladimir Bragin, director for analysis of financial markets and macroeconomics at Alfa Capital, exposure to gold without intermediate links in the form of ETFs or other financial products “will significantly reduce costs and risks of deviation of the share price from the price of the underlying asset.”
The transition to physical metal reduces the costs of the fund. In case of purchasing a “gold” ETF in a mutual fund of securities, the management company will have to pay a brokerage commission, as well as a commission for managing this ETF, which amount to 0.25-0.40% (depending on the provider). When trading gold on the Moscow Exchange, only a brokerage fee is charged, which currently rarely exceeds 0.05%. Due to the fact that foreign ETFs are traded in foreign currency, and shares of BPIFs and open-ended mutual funds are traded for rubles, there are additional costs for currency conversion.
«The commission can be 0.01-0.03% plus the spread between the purchase price and the sale price, depending on whether the transaction is carried out on the exchange or over-the-counter market, adds from a few hundredths to several tenths of a percent “, – says the investment director of the management company” Opening ”Vitaly Isakov.
According to managers, physical metal funds are perceived by investors as more transparent and less risky. In addition, from a marketing point of view, when a fund owns gold is more perceived by clients than when a fund owns an ETF that holds gold in vaults in the US and the UK, according to Anton Kravchenko, portfolio manager at Raiffeisen Capital. “At the same time, the ETF prospectuses say that the gold in the vaults is not insured,” says Mr. Kravchenko. In the case of trading on the Moscow Exchange, NCC clears and acts as a central counterparty in the precious metals market.
In the case of exchange-traded funds, the accuracy of the display of prices and the liquidity of assets are important. “The possibility of carrying out transactions on the commodity section during the whole trading day will make it possible to bring the dynamics of the prices of shares of the exchange-traded fund as close as possible to the price of gold,” says Mr. Bragin.
According to Vitaly Gromadin, senior analyst at BCS World of Investments, ETFs are a very liquid instrument, as opposed to investing directly in gold bars and coins. The average daily turnover in shares of gold ETFs is about $ 1.5 billion per day, which is comparable to the volume of gold trading on the Moscow Exchange for half a year (116 billion rubles).
At the same time, the turnover on the stock exchange has noticeably grown compared to last year, when in a year they barely exceeded 50 billion rubles, and are already sufficient for the formation of large funds. In addition, buy and sell orders are constantly supported by three market makers and provide a spread of about 0.05%, said Nikita Knyazev, director of the precious metals market at the Moscow Exchange.
However, market risks should also be taken into account when investing in precious metals. Recently, the interest of international investors in gold has been declining. According to Kommersant’s estimates, based on the Bank of America report (based on Emerging Portfolio Fund Research data), the total amount of funds withdrawn from gold ETFs for the week ended July 21 exceeded $ 1 billion. This is the maximum outflow since the beginning of March. Over the past two weeks, investors have withdrawn $ 1.6 billion from such funds.In such conditions, the cost of gold remains near the level of $ 1.8 thousand per troy ounce, although in May it reached $ 1.9 thousand, and a year ago it exceeded $ 2 thousand.
At the same time, portfolio managers are advised to keep some of the funds in gold for diversification.
Vladimir Bragin recommends investing in precious metals 5-10% of the assets of his own portfolio, including using shares of investment funds. “Investments in gold and silver have always been considered relevant for long-term investors, as they provide an opportunity to protect savings during periods of falling stock markets,” explains Mr. Bragin.