– ETF Securities’ Physical Gold ETCs now the largest ETC in Europe with $4.8bn in assets, up 55% in 2008
– Physical gold ETC is one of most liquid ETFs/ETCs in Europe, trading $14.5bn in 2008 up 230% from 2007
– Gold was star performer in 2008 with a 44% return in GBP terms, outperforming equities
– GBS & PHAU in top three ETFs on the LSE …
ETF Securities Limited has seen total Assets Under Management (AUM) in its physical gold ETCs grow in the past year to $4.8 billion, up $1.75 billion. The 55% increase in assets is due to gold’s dominant position as a liquid safe haven asset while not being subject to credit risk. In addition, gold’s low to negative correlation with equities helped it to dominate 2008 performance tables, with a 4% increase in USD and 44% increase in GBP. ETFS Physical Gold (PHAU) grew by $1.2 billion and Gold Bullion Securities (GBS) grew by $550 million during 2008. The 55% increase in physical gold ETC assets compares to a 5% fall in overall European ETF assets in 2008.
Both physical gold ETCs, ETFS Physical Gold (PHAU) and Gold Bullion Securities (GBS) are also in the top three ETFs / ETCs traded on the London Stock Exchange (LSE). Combined, they traded $14.5 billion in 2008 across five European exchanges, trading an average of $58 million per day. This was up 230% from 2007 when they traded $4.3 billion. Enabling physical gold ETCs to be so liquid is the fact that the underlying, LBMA physical Good Delivery bars trade around $6 billion per day, making gold more liquid than any equity on the planet. Globally, physical gold ETCs have now accumulated $30 billion in assets and trade up to $1 billion per day. In Europe, ETF Securities’ physical gold ETCs are listed on five exchanges and traded in three currencies.
In today’s world where investors are worried about credit risk, interest rates are extremely low, and governments are reflating and building up debt aggressively, gold is proving to be a popular investment. There has been a strong rise in demand for physical gold in all forms – World Gold Council figures show that demand for physical gold (including ETCs) in 3Q 2008 was the highest on record. There has been high demand growth for ETCs because of their high liquidity, ease of access, no premiums due to shortages (as has been seen for coins and bars in many instances), and of course their safety and ease of storage.
ETF Securities’ physical gold ETCs are all backed by “allocated” gold bars – uniquely identifiable bars which carry no bank credit risk. The precious metal bars are held in trust in London by the Custodian HSBC Bank USA N.A., the world’s leading Custodian for ETCs. The metal held with the Custodian must conform to the rules for Good Delivery of the London Bullion Market Association (LBMA). Securities are only issued once metal is confirmed as being deposited into the Company’s bullion account with the Custodian. Consistent with allocated gold, no precious metal is borrowed, loaned out nor does it earn any income.
Last year, ETF Securities also announced that its physically backed precious metals platform issued by ETFS Metal Securities Limited is Shariah compliant. The ETCs include ETFS Physical Gold, ETFS Physical Silver, ETFS Physical Platinum, ETFS Physical Palladium and ETFS Physical PM Basket. The ETCs are the first platform of Shariah compliant ETCs globally. The ETCs provide investors access to investments consistent with Islamic principles. The Shariah compliance had resulted in a great deal of interest, particularly from investors located in the Middle East, North Africa and Asia.
ETF Securities now offers more than 130 ETCs with over $7 billion in assets. The ETCs provide investors with a wide variety of investment strategies with ETCs offering physical, long, forward, leveraged and short exposure to all commodity sectors. ETCs are simple to access as they are traded in three currencies (Euros, USD and Sterling) and listed on five major European Exchanges including the London Stock Exchange, Euronext Paris, Euronext Amsterdam, Deutsche Borse and Borsa Italiana. Most recently, oil ETCs including ETFS Crude Oil (CRUD) and ETFS Brent Oil (OILB) have begun to trade up to $100 million per day.
Commenting, Nik Bienkowski, Chief Operating Officer, at ETF Securities, said:
“In the last two months of 2008 and continuing this year, investors are seeking assets which are liquid, secure and transparent. Alternative investments should help to protect portfolios due to the their low correlation with equities and bonds, however bans on redemptions and other well published issues have tarnished many alternative investments such as hedge funds and real estate. Exchange traded commodities (ETCs) solve these issues.
“ETCs are as liquid as the underlying market, they are transparent with detailed disclosure and with many ETCs being collaterlised, they are also secure. It is therefore not surprising that our physical gold ETCs have grown to approximately $5 billion in assets, with AUM up 55% and volumes up 230% in 2008. More recently, investors have been pouring into long ETCs tracking oil such as ETFS Crude Oil and ETFS Brent which have seen inflows of $600 million in nine weeks.”
Commenting, Nicholas Brooks, Head of Research and Investment Strategy, at ETF Securities, said:
“The strong demand for physical gold such as ETCs is not surprising given the macroeconomic situation today. ETFS Physical Gold and Gold Bullion Securities grew by 55% in 2008 alone, becoming one of the most dominant ETC/ETF in Europe. With financial instability high, counterparty risk a serious issue, governments boosting money supply at an unprecedented rate, and government debt levels expected to grow rapidly over the next few years, there are good reasons for conservative investors and the general public to want to hold a portion of their assets in gold. Gold’s price performance and demand last year certainly fits this trend with gold one of the best performing assets in 2008 and also over five and ten years. Last year, gold was up 4% in USD and 44% in GBP.”
Source:ETFWorld.co.uk – ETFSecuritie