Investing in gold - 3 fund ideas

We recently took a closer look at the investment case for gold, the role it plays when markets go astray, and whether you should hold the shiny stuff.

Investing in gold – should you hold the shiny stuff?

For part two, we’re sharing three fund ideas that offer different ways for investors to invest in gold.

While the merits of gold are clear - some inflation protection, potential for growth, and diversification to a broader investment portfolio – it does come with its own risks. Prices can sometimes be volatile, impacted by things like natural disasters, political tensions or wider economic events, like supply constraints.

We think it should only form a small part of a diversified portfolio, so if you're not sure if an investment is right for you, ask for financial advice. All investments can fall as well as rise in value, so you could get back less than you invest. Past performance isn’t a guide to the future.

3 fund ideas to invest in gold

Buying physical gold bars and coins can be expensive and impractical for most. After all, you hardly want to store them under your mattress. But there are other options.

Funds and Exchange Traded Products (ETPs) are an easy way to invest. Below are three ideas that invest in gold. Though investing in funds and ETPs aren’t right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest. An investment in a specialist area adds risk, so should only form a small part of a well-diversified portfolio.

Ninety One Global Gold

Josef Licsauer, Investment Analyst

The Ninety One Global Gold fund aims to grow your money over the long term by investing companies around the world involved in gold mining. It also has a small amount invested in other precious metals, like silver and copper.

The fund has been run by industry veteran George Cheveley since April 2015. Cheveley has been working in the industry for over 30 years and is a specialist in metals and mining. He believes investing in companies that can generate stronger return on capital over the long term. This, along with a focus on environmental, social and governance factors, is key to outperforming commodity cycles over time.

As a result, the manager will steer towards investing in high quality companies that are producing high and sustainable cashflows.

They also need to have a resource or competitive advantage that others will struggle to replicate, high quality management teams, and resilient and sustainable business models.

Past performance is not a guide to the future. Source: Lipper IM, to 28/02/2023.

More about Ninety One Global Gold, including charges

Ninety One Global Gold Key Investor Information

Troy Trojan

Hal Cook, Senior Investment Analyst

Instead of trying to shoot the lights out, Troy Trojan aims to grow investors’ money steadily over the long run, while limiting losses when markets fall. Though as with any investment, this isn’t guaranteed and it can still fall in value.

Gold is one of four 'pillars’ of investment within the fund and typically accounts for around 10% of its exposure. The managers invest in both physical gold and gold-related investments, like companies whose fortunes are strongly linked to the gold price.

While this fund isn’t a specific gold fund, it does consistently provide meaningful exposure to it. It’s a way to invest in gold, without having to invest in a specific gold fund. The managers will also tweak how much they invest in gold over time based on their level of conviction compared to other asset classes like shares and bonds.

While the fund contains a diverse range of investments, it’s concentrated. This approach means each investment can contribute significantly to overall returns, but it can increase risk. The fund can also invest in smaller companies, which adds risk.

Past performance is not a guide to the future. Source: Lipper IM, to 28/02/2023.

MORE ABOUT TROY TROJAN, INCLUDING CHARGES

TROY TROJAN KEY INVESTOR INFORMATION

iShares Physical Gold ETC

Alexander Watkins, Passive Investment Analyst

Finally, investors can gain exposure by using an ETP. Compared with trying to invest directly, these are a simpler and more convenient way for investors to access specialist areas, like gold. These investments are bought and sold the same way as shares and aim to track the performance of the commodity.

Some Exchange Traded Products (ETPs) invest in the physical commodity, where the manager is responsible for transportation, insurance and storage costs. Others use derivative contracts to artificially replicate the performance of the commodity, without having to own it. This saves on costs, but it’s a higher-risk approach.

The iShares Physical Gold ETC tracks the gold spot price – this is the current price in the marketplace at which a given security, commodity or currency can be bought or sold for immediate delivery.

This ETC only accepts gold that meets The London Bullion Market Association (LBMA) Good Delivery rules. In line with these rules, the bars also aim to comply with LBMA’s Responsible Sourcing Programme, making sure that 100% of the gold bullion backing the ETC is responsibly sourced.

BlackRock is currently the largest asset manager in the world and the iShares brand represents BlackRock's family of index tracking and exchange-traded funds. As the world's biggest asset manager, and with lots of resource and knowledge under its belt, BlackRock aims to drive further development in this part of the investment market. Being such a large player in the index tracking arena gives BlackRock unique access to the marketplace, which can help reduce trading costs.

With an ongoing charge of 0.12%, it’s also competitively priced in the market versus its competitors. Unlike funds, there are dealing charges when buying and selling ETFs through HL. However, our annual charge for holding ETFs is zero in the HL Fund and Share Account, and 0.45% in the HL Stocks and Shares ISA (capped at £45) and HL SIPP (capped at £200). More on charges.

A glance at the five-year performance table below shows in some years the ETC has tracked the index more closely than in others.

As this is an offshore fund, you’re not normally entitled to compensation through the UK Financial Services Compensation Scheme.

Past performance is not a guide to the future. Source: Lipper IM, to 28/02/2023.

MORE ON ISHARES PHYSICAL GOLD ETC, INCLUDING CHARGES

ISHARES PHYSICAL GOLD ETC KEY INVESTOR INFORMATION