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Published 01 August 2013 00:45, Updated 26 November 2013 18:35
Gold ETPs are competing against the fact that many Australians are descended from goldminers, so sweating on a lucky strike must be in our genes. Photo: Bloomberg
This week’s cover star, Graham Tuckwell, was right when he guessed that many investors only used to buy goldmining companies to get access to the gold price.
Introduce exchange-traded products (ETPs) backed by a warehouse full of gold bullion, as Tuckwell did in 2003, and there will be people who prefer their predictable boredom over waiting for Newcrest to shout “Eureka!”
Not many Australians, though.
The homeland of Tuckwell’s ETF Securities is also its weakest performer.
“There should be $5 billion in our ASX physical gold ETP, but there’s only $500 million or some bloody thing. Meanwhile Newcrest has destroyed $20 billion of value in the last six weeks!” he fumes. (Tuckwell was speaking before Newcrest’s upwards turn last week.)
Gold ETPs are competing against the fact that many Australians are descended from goldminers, so sweating on a lucky strike must be in our genes.
ETPs generally have also faced obstacles peculiar to Australia. ETPs tend to passively track an index, whereas we love to gamble, and back ourselves to pick our own shares or actively managed funds, in spite of evidence that the index usually does better after expenses.
ETPs were never set up to pay commissions to middlemen, either, so until financial services reforms were passed, planners would rarely recommend them to clients.
Tuckwell can take heart, however. Things are looking up for ETPs, with a 20 per cent rise in their Australian-held market capitalisation to $7.63 billion over the last six months, according to a review by ETP vendor BetaShares.
Self-managed superannuation funds are driving much of the growth. A report by Investment Trends found a 28 per cent increase in the number of SMSFs using ETPs over the past 12 months, and there’s plenty of growth potential – ETPs still only account for 1 per cent of total SMSF assets, where the rulers are still cash, direct blue-chip shares and property.
More gamblers may come around as ETP versions of actively managed funds are launched, with Tuckwell just one of many with big plans to usurp unlisted unit trusts.