Gold is losing its luster with investors in exchange-traded funds. But an active asset management firm is betting it can bring back that shine using popular smart beta strategies.
U.S. Global Investors Inc., a San Antonio, Texas-based asset manager that oversees mutual funds focused on gold and other similar commodities, listed the U.S. Global GO Gold and Precious Metals Miners ETF, symbol GOAU, on June 28. The fund holds royalty and streaming companies in addition to gold miners and producers, according to Frank Holmes, the firm’s chief executive officer. The ETF also weights its holdings not by size but by fundamental factors, such as revenue per employee, which Holmes says gives it an edge over its rivals.
“What we’ve done, as active managers, is said, ‘Let’s apply a quant approach,’” he said.
The ETF enters the field at an awkward time. Gold is down roughly 10 percent from its July 2016 peak. And even after miners posted their best profit margins in four years they’re finding it difficult to cut costs further, leading some investors to call a top for the sector.
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ETFs tracking miners became investor darlings last year as the price of gold climbed, but have since fallen out of favor as investors have pulled record amounts of cash from the funds this year. After swelling to as much as $12.4 billion in April, assets in the VanEck Vectors Gold Miners ETF, the largest tracking that part of the industry, shrunk by more than 30 percent. In May alone, investors withdrew $1.4 billion from the ETF, according to data compiled by Bloomberg.