SSGA confirmed that the new unlisted managed fund in Australia seeks to track the performance of the spot gold price (LBMA Gold Price PM in Australian dollars) by investing in securities that are backed by physical gold bullion securely held in vaults in London, New York, and Zurich.
According to the firm, its management fee of 0.14 per cent per annum makes it the lowest-cost gold fund domiciled in Australia.
SSGA Australian head of investments, Jonathan Shead, said the fund, which was launched in response to investor demand, is a “significant new offering for the Australian market”.
“Gold has never gone away as a diversifying allocation of an investment portfolio, but today’s heightened climate of economic and geopolitical uncertainty has brought its role to the fore,” Shead said.
“Investors tend to use gold as a potential hedge against market volatility and for its potential diversification benefits when included in a traditional portfolio of equity and fixed income assets.”
Asia-Pacific gold strategist for SSGA, Robin Tsui, added that gold may also serve as a hedge against inflation.
“The price of gold is determined by a complex matrix of global macroeconomic and fundamental factors, including central bank policies and interest rates, emerging market demand and mining production,” Tsui said.
He noted a key attribute of the product is its provision of a cost-efficient and secure way to gain access to the gold market without having to pay the transportation, storage, and insurance costs of holding physical gold.
ANZ Private Bank will be seeding the fund as part of a broader change to its strategic asset allocation, including a debut allocation to gold.
Its chief investment officer, Lakshman Anantakrishnan, said the decision to make an allocation to gold is focused on improving the risk characteristics of its multi-asset portfolios.
“Typically, rising real yields and a strong dollar spell trouble for the precious metal, but safe haven demand is rising, and some governments and central banks are looking to diversify their reserve assets away from the dollar,” Anantakrishnan said.
“For investors, the asset class can play a similar role during periods of uncertainty, helping add diversification to portfolios given its historically low or negative correlation to most other asset classes.”
The State Street Gold Fund is available to both institutional and advised investors, as well as intermediary investors such as advisers and platforms.
According to recent analysis by the World Gold Council (WGC), consensus suggests gold’s gains will stand at some 10 per cent for the full year with falling rates in developed markets expected to help maintain current growth levels alongside continued support from global investors.
“Given that gold is already up by more than 10 per cent and consensus suggests a similar result for the full year, it reiterates that gold – supported by contributions from other sectors – can perform well even when rates remain as expected,” it said in its mid-year outlook.
While a “rangebound” performance is widely expected, the WGC also noted that gold could, in fact, go on to outperform with increased flows from Western investors, who have so far been “a missing part of the puzzle”.
