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(May-2003) Super funds to strike gold on ASX
Directors of recently listed Gold Bullion Limited believe they have established a viable vehicle to help super funds reduce the risks and volatility of their investments.
Gold Bullion allows super funds to buy gold bars on the ASX for the first time. Each gold security gives the investor a 10th of an ounce of gold bullion, held in the London vaults of custodian bank, HSBC Bank.
Gold Bullion chairman Graham Tuckwell says the structure of the company makes investments in gold far more liquid as the securities are easily traded on the ASX. It also provides super funds with a suitable way of entering the gold market as fund trustee deeds often don’t allow them to buy physical metals but do allow them to buy listed securities.
He adds that the cost of holding the gold is far lower than that of holding coins. In addition to having to be insured and kept safe, coins are often sold at a premium of between 3 to 4 per cent while the premium for Gold Bullion’s securities has been less than 1 per cent.
Tuckwell says his company is not promoting gold as an outperformer of other asset classes, but rather as a “bit of insurance” in the form of a risk management and diversification tool”.
A recent study by PricewaterhouseCoopers actuary David Knox found that gold is in a class of its own and that it has a slightly negative or zero correlation to all the other asset classes. Indeed, the introduction of gold bullion into a portfolio over the past five or 10 years would have reduced the volatility of investment returns.
Knox’s work also revealed that over the past five years, the "best" asset allocation for the period (being on the efficient frontier) would have included 2.5 per cent to 7.5 per cent in gold bullion.
AUTHOR
Mike Taylor
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