Jupiter Gold & Silver Fund
Alternatives: gold and silver
In a time of economic turmoil, monetary metals are of interest.
3 REASONS TO CONSIDER AN ACTIVELY MANAGED ALLOCATION TO GOLD AND SILVER
1. INFLATION
Many investors have little or no exposure to monetary metals like gold and silver. If inflation rises even further, holding some gold may help mitigate the effects it can have on your broader investment portfolio.
The gold price typically moves inversely to ‘real’ interest rates – the rate of interest after taking into account the value-destructive effects of inflation. Market expectations for future real interest rates in the US have turned negative, meaning that some US Treasury bondholders could face losses in post-inflation terms. We believe there is a high likelihood of this trend continuing, and in our view it is an ideal environment to consider monetary metals.
‘Shrinkflation’, where products become smaller but cost the same, is a well-known phenomenon. It is harder to track than simple price rises but is a good example of how inflation can appear from ‘out of the blue.’
The gold price typically moves inversely to ‘real’ interest rates – the rate of interest after taking into account the value-destructive effects of inflation. Market expectations for future real interest rates in the US have turned negative, meaning that some US Treasury bondholders could face losses in post-inflation terms. We believe there is a high likelihood of this trend continuing, and in our view it is an ideal environment to consider monetary metals.
‘Shrinkflation’, where products become smaller but cost the same, is a well-known phenomenon. It is harder to track than simple price rises but is a good example of how inflation can appear from ‘out of the blue.’
2. POLITICAL UNCERTAINTY
In the present era of political uncertainty, gold is “apolitical” money, in that it is not issued by a central bank or government. In contrast, the US dollar is highly politicised – the spectre of dedollarisation hasn’t gone away, and the US dollar’s privileged role in the global financial system is increasingly being questioned.
Central banks have injected vast amounts of stimulus into the system in the last two years, swelling their balance sheets to extreme levels. And unlike in 2008, this money is flowing into the real economy.
History tells us the result could be inflation – with negative real interest rates and a devaluing of fiat currencies, or those currencies that are not backed by a commodity such as gold or silver.
If the Federal Reserve were to enact even more extreme monetary policy, such as Modern Monetary Theory or `helicopter money’ (whereby a government prints large sums of money and distributes it to the public to encourage economic growth), in order to finance government spending plans, that would be supportive of holding gold to protect a portfolio against inflation.
Central banks have injected vast amounts of stimulus into the system in the last two years, swelling their balance sheets to extreme levels. And unlike in 2008, this money is flowing into the real economy.
History tells us the result could be inflation – with negative real interest rates and a devaluing of fiat currencies, or those currencies that are not backed by a commodity such as gold or silver.
If the Federal Reserve were to enact even more extreme monetary policy, such as Modern Monetary Theory or `helicopter money’ (whereby a government prints large sums of money and distributes it to the public to encourage economic growth), in order to finance government spending plans, that would be supportive of holding gold to protect a portfolio against inflation.
3. OUR DIFFERENCE
An actively managed approach may mean a small allocation to the Jupiter Gold & Silver Fund could offer similar potential benefits to a portfolio as would a larger holding in pure gold in, for example, an exchange-traded fund (ETF).
The investment objective of the Fund is to seek to achieve a total return by investing predominantly in listed equities. In seeking to achieve its investment objective, the fund aims to deliver a return, net of fees, greater than that of the composite benchmark comprising 50% Gold Price (XAU) and 50% FTSE Gold Mines Index, with net dividends re-invested over rolling 3 year periods.
The investment objective of the Fund is to seek to achieve a total return by investing predominantly in listed equities. In seeking to achieve its investment objective, the fund aims to deliver a return, net of fees, greater than that of the composite benchmark comprising 50% Gold Price (XAU) and 50% FTSE Gold Mines Index, with net dividends re-invested over rolling 3 year periods.
- The fund manager aims to outperform gold to help allocators generate meaningful attribution
- Flexible and dynamic strategy that allocates to gold and silver bullion, and mining equities
- De-risked approach to investing in bullion and mining equities
Actively blending silver with gold
The manager aims to add value by increasing exposure to silver when prices are rising, and reducing exposure when prices are falling.
Active exposure to gold and silver mining company shares, alongside bullion
Taking exposure to shares in companies that mine gold and silver also offers the potential to generate superior returns when gold and silver prices are rising, as mining company shares tend to rise (and fall) more than the prices of the metals themselves.
As with the blending of gold and silver, the mix of exposure to mining shares and the metals themselves is actively managed with a view to adding value as market conditions evolve.
As with the blending of gold and silver, the mix of exposure to mining shares and the metals themselves is actively managed with a view to adding value as market conditions evolve.
WHY ALLOCATE TO SILVER ALONGSIDE PHYSICAL GOLD?
Including silver in the portfolio offers the potential for higher returns than a pure gold allocation. Silver prices tend to follow gold. Silver typically increases in value faster than gold when precious metal prices are rising. But because silver markets are smaller, silver prices also decline faster when both metals are falling.
Silver also has dual importance as an industrial component, as well being a monetary store of value.
There is growing demand for silver for use in green technologies, such as photovoltaic cells for solar panels, and it is widely used in electronics! Silver can be found in solar cells, water purifiers, touch screen & smartphones, electric vehicles and semiconductors.
Silver also has dual importance as an industrial component, as well being a monetary store of value.
There is growing demand for silver for use in green technologies, such as photovoltaic cells for solar panels, and it is widely used in electronics! Silver can be found in solar cells, water purifiers, touch screen & smartphones, electric vehicles and semiconductors.
Engagement Case Study – De Grey Mining
Joe Lunn describes the Gold & Silver team’s engagement with De Grey Mining and the importance of mining companies operating with sensitivity towards local communities.
Fund specific risk
- Investment risk – there is no guarantee that the Fund will achieve its objective. A capital loss of some or all of the amount invested may occur.
- Sector concentration risk – the Fund’s investments are concentrated in natural resource companies, and may be subject to a greater degree of risk and volatility than a fund following a more diversified strategy. Silver tends to outperform gold in a rising gold price environment and it tends to underperform gold when sentiment moves against the sector.
- Strategy risk – as the Fund invests in other collective investment schemes, which themselves invest in assets such as bonds, company shares, cash and currencies, it will be subject to the collective risks of these other funds. This may include emerging markets risk and smaller companies risk.
- Company shares (i.e. equities) risk – the value of Company shares (i.e. equities) and similar investments may go down as well as up in response to the performance of individual companies and can be affected by daily stock market movements and general market conditions. Other influential factors include political, economic news, company earnings and significant corporate events.
- Concentration risk (number of investments) – the Fund may at times hold a smaller number of investments, and therefore a fall in the value of a single investment may have a greater impact on the Fund’s value than if it held a larger number of investments.
- Smaller companies risk – smaller companies are subject to greater risk and reward potential. Investments may be volatile or difficult to buy or sell.
- Liquidity risk – some investments may become hard to value or sell at a desired time and price. In extreme circumstances this may affect the Fund’s ability to meet redemption requests upon demand.
- Currency risk – the Fund can be exposed to different currencies. The value of your shares may rise and fall as a result of exchange rate movements.
- Derivative risk – the Fund may use derivatives to generate returns as well as to reduce costs and/or the overall risk of the Fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment. Derivatives also involve counterparty risk where the institutions acting as counterparty to derivatives may not meet their contractual obligations.
For a more detailed explanation of risks, please refer to the “Risk Factors” section of the prospectus.
The Prospectus and Key Investor Information Document (KIID) or Key Information Document (KID) are available for download in the document library.
Meet the team
About the fund manager
Ned joined the company from Merian Global Investors and manages the Jupiter Gold & Silver Fund. He has nearly two decades of experience in precious metals investing, having founded a dedicated monetary metals fund in 2009 at Quilter Cheviot. Ned began his career at Smith & Williamson and graduated from the University of Bristol in 1998 with a BA (Hons) in Spanish.
Literature
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