Resources

Valuing gold in a portfolio

Nov 03, 2020

The value of gold is more than its spot price but also how it works in a portfolio. As an asset with multiple drivers determining its price, gold can seem mysterious, but the data suggests its role in client portfolios is clear. Gold’s investment value Gold can’t be valued using traditional metrics related to coupon or dividend value. While some institutions have created their own models, it can be more valuable to consider the interaction of gold with other assets in a portfolio. Gold is included in portfolios for a myriad of reasons – diversification, growth, as a hedge against inflation, and for a volatility safe-haven. These reasons are backed by the data. The below chart shows the correlation between gold and other asset classes which demonstrates why it is able to perform differently and even offer positive performance in volatile periods. Allocating to gold in a portfolio Gold allocations traditionally spread from 2-10% of a portfolio depending on risk tolerance and market conditions. For many investors, taking a flexible approach may be the answer, dialling up or down allocations based on individual client portfolio needs and market activity. For example, some financial advice firms, like Stockspot, have used a slightly higher allocation of 12% in recent times. Using an ETF like ETFS Physical Gold (ASX Code: GOLD) may be a suitable option for many portfolios as it offers a low-cost, liquid and easy to use exposure without the need for physical storage. Contact us to find out more about GOLD and using it in your portfolio. Client Services Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au

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The value of gold in your portfolio

Nov 03, 2020

Gold can seem like a mysterious asset, but data suggests it has a clear value in a portfolio. Setting the price Gold prices are set by the London Bullion Market Association (LBMA) which also incorporates specific global standards for gold sales and receipt. According to the World Gold Council, there are four broad sets of drivers to indicate gold’s performance1 which vary in their influence at different points in time. Economic expansion: gold is used in jewellery, technology and long-term savings. These are areas that experience a boost in times of economic growth. These are also periods where inflation and interest rates may rise, and gold is traditionally viewed as a hedge against inflation. Risk and uncertainty: gold has traditionally acted as a store of value in uncertain times and its demand can go up in market downturns, for example, demand increased in the early months of the global COVID-19 pandemic. Opportunity costs: the costs and returns of other assets, such as bonds and currencies, can increase or decrease investor interest in gold. Momentum: price trends, the use of riskier investments and general investment flows can direct demand for and therefore the price of gold. The investment value of gold Gold is included in portfolios for a myriad of reasons – diversification, growth, as a hedge against inflation, and for a volatility safe-haven. These reasons are backed by the data. Gold has a low (and at times, negative) correlation to other assets as shown in the following chart. This means it performs differently to other asset classes thus assisting with diversification and in volatile periods in other asset classes. Gold has also offered positive performance over the longer term against other asset classes as shown in the following chart: Allocating to gold in a portfolio Gold allocations traditionally spread from 2-10% of a portfolio depending on risk tolerance and market conditions. For many investors, taking a flexible approach may be the answer, dialling up or down allocations based on individual client portfolio needs and market activity. For example, some financial advice firms, like Stockspot, have used a slightly higher allocation of 12% in recent times. Using an ETF like ETFS Physical Gold (ASX Code: GOLD) may be a suitable option for many portfolios as it offers a low-cost, liquid and easy to use exposure without the need for physical storage. Contact us to find out more about GOLD and using gold in your portfolio. Client Services Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au 1 https://www.gold.org/goldhub/research/relevance-of-gold-as-a-strategic-asset-2020-individual

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How to use thematic investing in your portfolio

Nov 02, 2020

Thematic investing exposes your portfolio to some of the major socioeconomic, environmental and technological themes of our times in a tailored way. So what does this actually mean and how can you use thematic investing in your portfolio? Download the whitepaper, here. What is thematic investing? Thematic portfolios look at long-term macro trends, such as robotics and automation, and then use various screens and information sources to identify the companies or assets which support this trend through infrastructure or services. It can span several sectors or even asset classes, for example, a thematic investment in technology is likely to include companies within the technology sector as well as those in other sectors which access this trend, such as Amazon or Netflix. Investment themes should be: Universal rather than specific to just one company or region1. Sustainable over longer periods, in some cases 20 years or more. Based on known patterns and pressures2. Some examples of well documented themes include virtual connectivity, ecommerce, biotechnology, the growth of the middle-class in Asia and climate change. How to use thematic investing in your portfolio Thematic investments are versatile and can be used in a range of ways, such as: To complement the equities component in the core of a portfolio. As a tactical tilt in the satellite portion of a portfolio towards trends or for growth. As a diversification tool to broaden from typical assets in a portfolio core. Whichever way investors choose to incorporate thematic investing within their portfolios, they should still consider the suitability for themselves and their portfolio, along with the risks involved - including risks that may be specific to a particular theme. Investors can consider a variety of options to access themes in their portfolios, such as: Direct shares in companies associated with a theme. Actively managed funds. Exchange traded funds (ETFs). Investors should be aware of different fees, minimum investments, brokerage, tax implications and W-8 BEN forms for some investments. There are different risks and benefits to using any of these approaches. Thematic investments offer investors the chance to be an active participant in the major forces driving human progress. They can also be the opportunity for investors to incorporate their passions within their investments, or even to have the potential of holding the ‘next big thing’ in a more manageable format. The increasing availability of tailored thematic investments in the market means they are more accessible than ever for investors to consider their suitability and fit for their needs, goals and portfolios. For more information on using thematic investments, please speak to ETF Securities. Client Services Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au 1 https://www.stockbasket.com/investmans-playbook/thematic-investment-ideas 2 https://publications.csiro.au/rpr/ws/v1/download?pid=csiro:EP126135&dsid=DS2

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Thematic investing for your clients’ portfolios

Nov 02, 2020

Investing in thematics is a newer concept but can expose your clients to some of the major socioeconomic, environmental and technological themes of our times. For many financial advisers, the question arises of how exactly to use such investments and allocate to them within a portfolio. What is thematic investing? Thematic portfolios follow a top-down approach to investing. They look at long-term macro trends, such as robotics and automation, and then use various screens and information sources to identify the companies or assets which support this trend through infrastructure or services. Themes should be: Universal rather than specific to just one company or region1. Sustainable over longer periods, in some cases 20 years or more. Based on known patterns and pressures2. Some examples of well documented themes include virtual connectivity, ecommerce, biotechnology, the growth of the middle-class in Asia and climate change. Access to thematic investments Typically, advisers might consider three different options for their clients. Direct shares in companies associated with a theme. Actively managed funds. Exchange traded funds (ETFs). Each carries different risks and benefits, along with varying fees, minimum investments, brokerage, tax implications and W-8 BEN forms in some instances. While still carrying investment risks such as market or liquidity risks, ETFs tend to be the lowest cost and most accessible option for investors given the potential for exposure to many companies and they usually cost less than actively managed options. How to allocate to thematic investments Thematic investments are versatile and can be used in a range of ways, such as: To complement the equities component in the core of a portfolio. As a tactical tilt in the satellite portion of a portfolio towards trends or for growth. As a diversification tool to broaden from typical assets in a portfolio core. The size of the allocation may vary depending on how the investor chooses to use it, ranging from 5-10% per investment depending on factors such as existing portfolio composition, risk tolerance, needs and goals. Thematic investments can help offer clients the chance to be an active participant in the major forces driving human progress. They can also be the opportunity for clients to incorporate their passions within their investments, or even to have the potential of holding the ‘next big thing’ in a more manageable format. The increasing availability of tailored thematic investments in the market means they are more accessible than ever for financial advisers to consider their suitability and fit for their clients’ needs, goals and portfolios. For more information on using thematic investments, please speak to ETF Securities. Client Services Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au 1 https://www.stockbasket.com/investmans-playbook/thematic-investment-ideas 2 https://publications.csiro.au/rpr/ws/v1/download?pid=csiro:EP126135&dsid=DS2

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Weekly ETF Monitor for week ending 23 October 2020

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Oct 27, 2020

This week's highlights Equity markets traded mainly lower last week, with some exceptions. Global banks fund BNKS was the top performing equity ETF, followed by South Korean fund IKO and agriculture fund QAG. China new economy fund CNEW, cybersecurity fund HACK and gold miners funds MNRS and GDX were the week’s biggest decliners. ETFS Ultra Short Nasdaq 100 Hedge Fund (SNAS) returned 2.4% for the week as the Nasdaq-100 declined. Gold traded slightly lower last week, though other precious metals outperformed. ETFS Physical Platinum (ETPMPT) was the top performing fund for the week, returning 5.1%. Palladium fund ETPMPD was also amongst the top performers. Crude oil ETF OOO dropped 3.1% for the week. Total reported flows into domestically domiciled ETFs were $301m, while outflows totalled $32m. Domestic cash fund AAA saw the biggest inflows for the week followed by FAIR and QUAL. Leveraged domestic equity fund GEAR saw the week’s largest outflows. VAS was the most traded fund for the week, followed by AAA. Fixed income fund VBND saw above average volumes. ETFS Physical Platinum (ETPMPT) offers investors exposure to fully-allocated physical platinum and provides exposure to the supply and demand dynamics for the metal in areas such as the automotive, technology and medical industries.

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Weekly ETF Monitor for week ending 16 October 2020

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Oct 20, 2020

This week's highlights Equity markets were mixed last week with dispersion across regions and sectors. China funds CETF, IZZ and CNEW were the top performing equity ETFs followed by tech-focused funds ATEC, HACK, NDQ and FANG. Domestic bank fund MVB also has a strong week. International energy companies (FUEL), global banks (BNKS), Japanese equities (HJPN) and property funds (REIT and MVA) were all amongst the poorest performers. Leveraged US dollar fund YANK was the week’s overall top performing ETF on the back of a drop in AUD from US72.4c to US70.8c. Gold and silver both gained ground, while palladium fund ETPMPD dropped 2.9% for the week. Total reported flows into domestically domiciled ETFs were $425m, while outflows totalled just $15m. Domestic equity fund IOZ saw the biggest inflows for the week followed by BBOZ. Domestic equity yield fund ZYAU saw the week’s largest outflows. IOZ was the most traded fund for the week, followed by BBOZ and AAA. Fixed income fund VAF saw above average volumes. ETFS FANG+ ETF (FANG) offers investors exposure to a concentrated portfolio of the world’s top innovation leaders across today’s technology and tech-enabled companies. FANG holds a portfolio of ten stock including Apple, Amazon, Google and Netflix. The fund returned 3.1% last week and is up 56.9% since its launch on 27th February 2020.

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