Goldman Takes Over Gold ETF

Today saw two major changes occur in the area of commodity ETFs. Not only did the Perth Mint Physical Gold ETF (AAAU) transfer over to Goldman Sachs Asset Management (GSAM) and adopt Goldman's name, the VanEck Vectors Coal ETF (KOL) changed its creation status and will no longer trade after today.

A Change Of Venue

When it launched, AAAU was backed by Australia’s Perth Mint and allowed investors to redeem shares for physical gold in the form of minted bars, cast bars or coins. As of Dec. 11, the $515 million AAAU was no longer backed by the state of Western Australia, where the Perth Mint is located, and Goldman Sachs has taken over the operation of the fund.

Michael Crinieri, global head of ETFs for GSAM, said the firm believed investors in the fund would benefit from the firm’s size, scale and expertise. It is GSAM’s first foray into the physical commodity ETF space.

Custodian J.P. Morgan or the fund’s subcustodians will store AAAU’s gold in vaults located in the United Kingdom, according to the prospectus, rather than in the central bank vaults of Perth, Australia, as had previously been done.

AAAU’s ticker and expense ratio remain the same, but the new prospectus states that "Investors do not have the right to take delivery of the physical gold bullion in exchange for the Shares such investors own."

A Withering Industry

With regard to KOL, the fund has been around since January 2008, working out to roughly 13 years of trading. The fund has seen outflows in eight of those years and after a crash in the coal industry the same year it launched, never returned to previous highs. It has roughly $36 million in assets under management.

At the start of this month, the Dec. 3 issue of The Economist contained an article that posited that the coronavirus pandemic had been a death knell for the coal industry, with many plants not just pausing their production but shuttering entirely. On the same day shared by the magazine issue, VanEck announced it would be shuttering KOL. The fund’s holdings included everything from coal miners, to processors and transportation companies, basically the entire ecosystem.

Given that the fund has seen mostly outflows and has no direct competitors, it would seem the ETF industry also does not see much of a future for coal.

Contact Heather Bell at [email protected]