JERSEY, Channel Islands (HedgeWorld.com)–Executives at Liberty Ermitage Group have been bitten by the gold bug and, as a result, will launch a gold and precious metals hedge fund.
The new fund, the Liberty Ermitage Gold & Resources Fund, will be listed on the Irish Stock Exchange, domiciled in Bermuda. Liberty Ermitage will charge a relatively cheap 0.5% annual management fee and just 10% of profits, according to a statement from the firm. The minimum to invest will be US$15,000.
Spurred by a view that equity markets are going nowhere and that the low interest rates set by the world’s central banks will lead to inflation, Liberty’s executives view gold as a safe haven in a coming storm. “We still have a long way to go in purging all of the incredible bubble related excesses and structural imbalances in the U.S. economy,” said Ron Mitchell, chief executive and chief investment officer for Liberty Ermitage, in a statement. “It took over 18 years to create the biggest speculative bubble in stock market history and we would be deluding ourselves if we believe that this bear market in equities is coming to an end,” he said.
His argument: The stock market hasn’t bottomed yet–because panic has not spread widely enough and stock prices are still relatively high–while all of the fundamentals point to a continued weak U.S. economy. The Standard & Poor’s 500 still stands at a P/E ratio of about 30; recent performance data suggest the market could have a fourth down year in 2003; the housing market is starting to look weak; and borrowing continues at high levels. “This is not the environment to kick start a new bull market in equities,” says the Liberty Ermitage statement.
At the same time, Liberty’s execs believe gold is set for a major bull run, based on cuts in exploration and production and lowered selling by central banks, while metal should face increased demand across the globe, including Japan, China, Australia and the Middle East.
Liberty Ermitage suggests investors put up to 10% of their portfolio in their strategy. Since August, it has run a pooled gold account for private clients that was up 41% in February but that then fell sharply, leading to a total return since inception of about 10%, Liberty Ermitage says. Liberty execs believe that now it’s “the perfect time” to get into the gold market.