ETF Securities serves up a four-precious-metal fund in the hopes of showing investors that in using ETFs these days, all that glitters isn’t gold.
ETF Securities, the only exchange-traded fund firm to offer a full lineup of physical gold, silver, platinum and palladium ETFs, launched a one-stop-shopping option for U.S. investors that rolls all four of the precious metals into one fund.
The ETFS Physical Precious Metal Basket Shares (NYSEArca: GLTR), which is already available to investors in Europe, Australia and Japan, is designed to streamline the process of achieving the portfolio diversification that precious metals afford. ETFS is charging investors a 0.60 percent expense ratio. Using prices on Oct. 18 as a benchmark, just over half of GLTR will be invested in gold.
Gold has reached record highs recently—over $1,300 an ounce—amid gnawing anxiety among investors that central banks around the world are resorting to inflationary interest rate policies to jump-start economies that are in their worst downturn since the 1930s. But investors are increasingly interested in diversifying their precious metals exposure to maximize their inflation hedging.
“The consistent feedback from the beginning from the wealth management community is that what they want is a precious-metals sector solution,” Will Rhind, head of ETFS’ New York-based U.S. operations, said in a telephone interview, adding that its four existing U.S. precious metals ETFs are owned for the most part by institutions.
“Now, when their chief investment officer is recommending a 5 percent allocation to precious metals, they’ll have a way of filling that allocation without having to speculate or implement what the amount of the four metals should be,” added Rhind.
Rhind said the amount of each metal in GLTR is a function of weight. Each share of GLTR will have 0.03 ounces of gold; 1.1 ounces of silver; 0.004 ounces of platinum; and 0.006 ounce of palladium, he said, adding that that formula was arrived at by using a screen that takes into account variables on each of the metals including liquidity, new mining supply, total demand and industrial supply.
Based on Oct. 18 closing prices, GLTR was 53 percent gold, 34 percent silver, 9 percent platinum and 4 percent palladium. Rhind stressed that those percentages are a function of prices and, as such, will be continually shifting to some degree.
On a creation unit level, each 50,000-share basket will have 1,500 ounces of gold, 55,000 ounces of silver, 200 ounces of platinum and 300 ounces of palladium, Rhind said.
Distorting The Market?
Asked whether the presence of another precious metals ETF might further take up valuable supplies of platinum and palladium, Rhind said the day that that factor truly affects prices is a long way off.
“The investment demand for platinum and palladium, even with ETFs and other vehicles, still represents a pretty small amount; typically around 5 to 7 percent of annual demand for each,” Rhind said. “Yes, you could take an extreme and say that if that got to be significant, then of course, the market dynamics could change. But I think we’re a long, long way from that happening.”
ETFS’ four existing U.S.-based precious metals ETFs and their expense ratios and assets as of Oct. 20 are:
- The ETFS Physical Swiss Gold ETF (NYSEArca: SGOL): 0.39 percent expense ratio, $1.01 billion in assets
- The ETFS Physical Silver ETF (NYSEArca: SIVR): 0.30 percent expense ratio, $297.6 million in assets
- The ETFS Physical Platinum ETF (NYSEArca: PPLT): 0.60 percent expense ratio $456.8 million in assets
- ETFS Physical Palladium ETF (NYSEArca: PALL): 0.60 percent expense ratio, $488.6 million in assets