Rhind: Metals Demand, Economic Growth Tied

April 20, 2011

An economic uptick needs metals, buoys gold through inflationary pressures.


ETF Securities, the global ETF provider that is the only fund firm to offer a full lineup of physical precious metals ETFs in the U.S., has seen its assets under management in the U.S. skyrocket to $4 billion in the last year amid the booming commodities markets. The company is now gearing up to expand its presence in the U.S. with the launch of 18 new commodities ETFs in what would create the largest, most comprehensive commodities offering lineup available to U.S. investors today.

IndexUniverse.com Managing Editor Olivier Ludwig recently sat down with Will Rhind, head of ETF Securities’ New York-based U.S. operations, to discuss whether a recovering economy could dampen the prospects for precious metals, as well as what the company sees as its best asset-gathering moves ahead.

 

Ludwig: ETFS hit $4 billion in U.S. assets under management earlier this year. Where’s the biggest growth, if there’s an area that’s gathering assets more rapidly than others, or is this all just generalized asset gathering?

Rhind: We’ve been fortunate to see growth evenly distributed throughout our products. Among the individual metals ETFs, gold is the biggest, but only by a couple hundred million dollars. The others have done extremely well, from an asset-gathering perspective too. And the baskets continue to grow. So, the whole platform is doing really well. We now have seven precious metals ETFs, all physically backed, so we have five individual metals: gold, silver, platinum and palladium, and we have two baskets—a white metals (NYSEArca: WITE) and a precious metals (NYSEArca: GLTR).

Last year, as more positive news came out about the economy, we saw quite a lot of inflows into platinum and palladium. But this year, our gold product (NYSEArca: SGOL) has done really well; it has seen net inflows while other competing products in the market have seen outflows throughout these volatile times, so we are very fortunate.

So, in terms of distribution, gold is still the biggest, but it’s closely followed by palladium, then platinum and then silver, then GLTR and then WITE. We are lucky that there’s a decent distribution between all the products.

Ludwig: There seems to be a race to the bottom in terms of price, and SGOL ranks right in the middle of other large funds such as GLD and IAU. Are you convinced that what you bring to the table is distinct enough to justify the higher price tag than, say, IAU?

Rhind: Pricing is just one of the elements of whether a product is attractive or not. People make these decisions based on many factors. And we’ve seen that with SGOL: Owning physical gold and vaulting it in Switzerland has differentiated it enough in the marketplace to attract investor interest.

Ludwig: ETFS has not only SGOL, but also AGOL, which vaults in Singapore rather than Switzerland. Is there really a compelling investment case for picking where you vault your gold, or is that more of a marketing strategy?

Rhind: There’s clearly an investment case for it. It’s like when people open bank accounts. They choose one bank over another because they perceive one bank as safer than another. By vaulting your gold in Switzerland, for instance, you are taking a view on whether you are confident in that location or not. But we don’t make that choice between which location we see as safer than another. We let the clients decide. SGOL has been extremely successful, but we’ve also seen a lot of demand for gold vaulted in Singapore, which many see as the gateway to Asia. It’s certainly a banking and finance hub in Asia today. We make these products available, but we let the client decide.

 

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