Investec GSF Global Gold Fund (the "Fund") is a sector equity mutual fund. The Fund aims to achieve long-term capital growth primarily through investment in equities issued by companies around the globe involved in gold mining.
The Fund may also invest, up to one-third, in companies around the globe that are involved in mining for other precious metals and other minerals and metals.
Key risks of the product:
- Gold Mining Sector Risk – The Fund invests in a small number of sectors (i.e. gold mining) which may subject it to greater volatility than a more broadly diversified portfolio. The sectors may decline even while broader based equity market indices are rising. The Fund offers exposure to commodities and may include additional risks e.g. political risk, natural events or terrorism. This may influence the production and trading of commodities and the value of financial instruments offering exposure to such commodities.
- Smaller Company Risk – The Fund may invest in smaller company shares (for example, those in the gold mining sector) which may be less liquid and more volatile than the shares of larger companies, due to the smaller number of shares in issue and the frequently less diversified and less established nature of the business. These factors can create a greater potential for significant capital losses.
- Derivatives Usage Risk – The Fund may use derivatives for the purposes of hedging and/or efficient portfolio management ("EPM"). In adverse situations, the Fund's use of derivatives may become ineffective in hedging and/or in EPM and the Fund may suffer significant losses.
In the worst case scenario, the value of the Fund may be worth substantially less than the original amount you invested and in an extreme case could be worth nothing.
Investors should not only base on this material alone to make investment decisions. Please refer to the Fund Prospectus for the details of all risk factors.
Factors favouring physical gold and gold mining equities:
- Low global interest rates, substantial increase in money supply and structural weakness of the US dollar are driving investment demand for gold from Central Banks and retail investors through Exchange-traded Funds.
- Political reasons and environmental concern are hindering new explorations and supply. Gold production keeps falling for years.
- Significant divergence occurred between gold equities and gold prices which had produced a wide valuation gap. When such gap closes, we expect there is significant capacity in gold equities for strong performance.
- Comparing to other industries, large scale miners have strong balance sheets, positive cashflow, low debt level, relatively higher dividend yield and undervalued.
We are buyers of gold producers with:
1. Growing production profiles; have long life, low cost mines
2. Un-hedged and thus fully exposed to spot metal prices
3. Have the ability to replace reserves organically as opposed to via acquisition
4. Attractively valued; have rising share prices relative to the market of precious metals shares
- Portfolio concentrates on 30 to 50 equities with high qualities.