Merk Gold ETF To Be Redeemable In Bullion

May 08, 2012


In March, his firm put an ETF version of his flagship mutual fund, the $600 million Merk Hard Currency Fund, into registration in what amounted to the latest indication that heavy-hitters in the world of active fund management are turning their attention to ETFs.

The German-born Merk, known for his expertise in the world of currencies, told IndexUniverse in a recent interview that he believes strongly that the ETF—armed with features such as intraday tradability and a creation and redemption mechanism that keeps its real-time price and NAV close together—is destined to play a big role in the world of money management

The decision to bring a gold ETF to market appears related to the plans for the Merk Hard Currency ETF to the extent that Merk Investments indicated in the filing last month that the currency ETF’s possible investments in gold were likely to be implemented through exchange-traded products, including ETPs sponsored by Merk itself.

Apart from Merk Investments' internal objective of possibly using its own ETFs to obtain gold exposure for the Merk Hard Currency ETF, the yellow metal remains attractive to those worried that economic uncertainty and the loose-money policies of central banks in the world since the market meltdown in September 2008 are debasing the dollar and other currencies, like the euro.

While gold prices are down sharply in the wake of Greek and French elections over the weekend that have brought new uncertainty to the eurozone and its efforts to bring its debt crisis under control, gold prices are still up more than 2 percent year-to-date. Spot prices were around $1,600 a troy ounce early on Tuesday afternoon, down 2.3 percent from late on Monday.

Gold prices reached a high in September 2011 of around $1,900 an ounce. Private investment demand was almost a third of total annual gold demand at the end of 2009—up from 12.9 percent in 2000, the filing said.

GLD is up more than 247 percent since it was launched in November 2004, according to data on Google Finance.

Merk’s filing said that J.P. Morgan will serve as custodian of the trust, while Bank of New York Mellon will serve as trustee.

SSgA’s GLD, as noted, has an annual expense ratio of 0.40 percent, compared with 0.25 percent for the $9.52 billion iShares Gold Trust (NYSEArca: IAU).


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