Monday, 14 February 2011
Small caps and gold boost S&W
Smith & Williamson’s £45m Global Gold & Resources fund was among the best-performing funds of 2010 thanks to its exposure to smaller companies and the soaring gold price.
Managers Robert Lyon and Ani Markova said limited exposure to base metals, QE, M&A and higher inflation also helped the performance of the fund last year.
Markova said: “We recognised gold and silver had lagged the market at the beginning of the year so we reduced our base metal weighting and allocated more to these.
“We also began the year with a third of the portfolio in each of small caps, mid caps and large caps but switched this to 50% in small caps, 20% in mid and 30% in large caps.
“Another strength has been finding early-stage companies with good assets and following them from exploration to development, and hopefully on to production.”
The fund returned 57.5% for the year to 31 January, compared to the performance of £3.4bn BlackRock Gold & General fund, returning 32.9% for the same period, and the £200m Investec Global Gold returned 42.8%, according to Morningstar.
The fund has just under 60% in gold mining stocks and 21.4% in other precious metals and minerals such as silver, platinum and diamonds.
The gold price rose 30% in 2010 to reach $1,420 an ounce, while silver surged 83%.
The managers warned investors not to expect the same sort of returns in the coming year.
“No investor should expect a 60% return per annum – it is not sustainable,” said Markova.
However, they are still extremely bullish on the asset class and think the gold price could reach $2,000 an ounce in the next few years.
Lyon said: “The fundamentals are still supportive of an upward trend in prices. We did take some money out of silver at the end of December and took cash to 7%, but we then saw a pullback in the silver market, so we have started to add to this again.
“With inflation, the printing of money in the US, UK and Europe and broader demand and supply issues, the fundamental backdrop is still there.
“People are looking at the rally and talking about a bubble, but the asset class is underowned.
“We are slowly seeing stronger institutional demand and investor flows moving across, but it is far from a consensus call. Any pullbacks are a buying opportunity.”
(Source: http://www.investmentweek.co.uk/investment-week/news/2025911/caps-gold-boost)

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