- Evy Hambro's taken on some extra responsibilities – a change we think is negative for investors
- The fund's had a difficult year compared to the broader market of gold miners
- The gold price could be boosted by demand from emerging markets in the long run
Gold's been used as a store of value for thousands of years. And that's still the case today.
When investors are more cautious in their outlook for markets, they often turn to gold for security. It means the gold price often behaves differently to share prices. That's why some investors hold gold as part of a diversified portfolio.
We think the BlackRock Gold & General Fund is a reasonable way to get exposure. Evy Hambro's been at the helm for almost 10 years and has more than 20 years of industry experience. He's got the support of an experienced, well-resourced team, which includes co-manager Tom Holl.
The fund invests in companies with exposure to gold and other precious metals, like miners and refinery businesses, rather than the precious metals themselves. Their performance partly depends on the price of those metals. But other things, like the success or failure of mining projects, also have an impact. That means their performance can be more volatile than investing in the metals directly.
Investing in such a specialist area is higher risk, and the managers' flexibility to invest in emerging markets and smaller companies increases risk further. We think specialist funds should only make up a small part of a wider portfolio. The fund isn't on the Wealth 50 list of our favourite funds.
A change to Evy Hambro's role
Evy Hambro's taken on some extra responsibilities at BlackRock and oversees the group's thematic range of funds. He sees this as a natural extension to his current role, but it could leave him with less time to focus on the fund over time. We still think the fund has the potential to do well over the long run, but overall we think this change is negative for investors.
How's the fund performed?
The fund lost money and didn’t perform as well as the broader market of gold miners last year. Past performance shouldn’t be seen as a guide to the future.
This was partly because of investments in companies that finance precious metal businesses in exchange for the right to purchase future production at a discount. They’ve struggled recently because rising interest rates made the returns they get on their investments look less attractive. Evy Hambro still sees plenty of potential in this area though, so he’s happy to hold on to his investments.
An investment in gold miner Eldorado also did poorly after it announced one of its mining projects was less successful, and more expensive, than hoped. It faced legal issues with a mine in Greece too.
The fund also didn’t invest enough in Barrick Gold. Its share price rose sharply after it merged with competitor Randgold Resources.
Performance has been strong over the long run. Evy Hambro's focus on higher-quality gold companies means we'd normally expect the fund to fall less when the broader market falls, although this won't always be the case and performance can be volatile at times. Investors should remember that all funds will rise and fall in value so you could get back less than you invest.
|Annual percentage growth|
Dec 13 -
Dec 14 -
Dec 15 -
Dec 16 -
Dec 17 -
|BlackRock Gold & General||3.0%||-18.1%||80.0%||-2.9%||-11.1%|
|FTSE Gold Mines||-8.8%||-15.9%||91.7%||0.7%||-4.5%|
Past performance is not a guide to the future. Source: Lipper IM to 31/12/2018
Brexit, political wrangling in Europe and a potential trade war between the US and China are just some of the things investors are worried about. If economic and political uncertainty continues, Evy Hambro thinks the security of gold could become more attractive to investors. An increase in demand could boost the gold price, and the share prices of companies in the gold industry although of course there are no guarantees.
Over the longer term he expects rising incomes in emerging markets to fuel demand for gold products, such as jewellery, while the absence of large gold discoveries could constrain supply and lead to a rising gold price.
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