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Weekly ETF Monitor for week ending 13 September 2019

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Sep 17, 2019

This week's highlights A cooling in trade tensions, strong U.S. economic data and stimulus from the ECB contributed to a risk-on sentiment last week. Financial sector funds (BNKS and MVB) and high conviction growth funds such as RBTZ, ROBO and ACDC all performed strongly. Asia-focused funds HJPN and IKO were also amongst the top performers. The week’s best performing ETF was Vanguard Global Value Equity Active ETF (VVLU), which returned 5.8%. Gold fell for a second consecutive week, with GOLD and PMGOLD, as well as gold mining funds (GDX and MNRS) all amongst the weeks’ poorest performers. Silver (ETPMAG) also declined, while palladium (ETPMPD) pushed-ahead to new all-time highs above US$1,600 per ounce. Total flows into domestically domiciled ETFs were $308m, while outflows totalled $134m. The biggest inflows were into cash (AAA), domestic equities (STW and IOZ) and gold (GOLD). Outflows were from U.S. equities (IVV) and Australian government bonds (IGB). AAA was the most traded fund last week, though the combined volume of IVV and IHVV made S&P 500 the most traded index exposure for the week. GOLD continued to trade above average volumes. ETFS ROBO Global Robotics and Automation ETF (ROBO) returned 4.1% for the week, led higher by strong performances across the Industrial and Information Technology sectors in the U.S., Japan and Germany.

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Weekly ETF Monitor for week ending 6 September 2019

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Sep 10, 2019

This week's highlights Geopolitical risks continued to be the focus of markets last week. Asian stocks rallied on the withdrawal of the Hong Kong extradition bill and added stimulus in China. HJPN, CETF and CNEW were all amongst the week’s top performers. Domestic resource stocks also benefited, with QRE and OZR both performing strongly. Gold retreated from recent highs, with GOLD down 2.0% for the week. Gold mining ETFs (MNRS and GDX) were the worst performing funds for the week. Silver also pulled-back from recent gains, with ETPMAG falling 3.0%. Total flows into domestically domiciled ETFs were $226m, while outflows totalled $22m. The biggest inflows were into cash (AAA), gold (GOLD) and a range of other fixed income ETFs (HBRD, FLOT, BILL, QPON, IAF and XARO). STW was the most traded fund last week, while BBOZ and GOLD saw above average volumes. ETFS Physical Gold (GOLD) surpassed the A$1bn mark in total assets under management for the first time last week.

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Weekly ETF Monitor for week ending 30 August 2019

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Sep 03, 2019

This week's highlights Best performers for the week were the suite of physically backed precious metal ETFs. ETFS Physical Platinum (ETPMPT) was up 10.9% for the week, ETFS Physical Silver (ETPMAG) was up 8.4% and ETFS Physical Palladium (ETPMPD) up 6.2%. YTD the top performers remain dominated by gold miners, led by VanEck Vectors Gold Miners ETF (GDX) up 48.2%. The worst performers were agricultural and long Aussie dollar ETFs, with the BetaShares Strong Australian Dollar Hedge Fund (AUDS) down 1.1%. Flows for the week consisted of inflows of $200 Million and outflows of $18 million. These flows were dominated by Australian equities, cash and physical gold. ETFS Physical Gold (GOLD), BetaShares Australia 200 ETF (A200) and iShares Core Cash ETF (BILL) all saw flows above $20 million.

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Weekly ETF Monitor for week ending 23 August 2019

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Aug 27, 2019

This week's highlights There was a small respite for Australian Equity markets last week as the Aussie market closed up before the dip in the U.S.. Equity strategies and in particular gold miners saw the top end of positive returns. BetaShares Global Gold Miners ETF (Hedged) (MNRS) was the best performer over the week returning 4.9%. UBS IQ Morningstar Australia Quality ETF (ETF) also had a positive week up 3.2%. Over the Year to Date gold miners and infrastructure strategies remain strong performers. The VanEck Vectors Gold Miners ETF (GDX) was up 45.2%, BetaShares Global Gold Miners ETF (Hedged) (MNRS) up 42.8% and AMP Capital Global Infrastructure Securities Fund (GLIN) up 27.7%. Year to Date only nine ETFs have had negative returns. Precious metals and gold miners are the best performers over the last twelve months. ETFS Physical Palladium (ETPMPD) is up 70.5% and ETFS Physical Precious Metal Basket (ETPMPM) up 38.4%. Flows over the week consisted of inflows of $180 Million and outflows of $140 Million. Investors globally chased exposure to the safe haven of Gold and Bonds. Most of the inflows were into Australian Cash and Commodities. ETFS Physical Gold (GOLD), iShares S&P/ASX 200 ETF (IOZ) and iShares Core Cash ETF (BILL) all had strong inflows. The largest outflow was from BetaShares Australia 200 ETF (A200).

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Weekly ETF Monitor for week ending 16 August 2019

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Aug 20, 2019

This week's highlights Last week saw positive returns across safe heaven assets like precious metals and consumer staples as volatility continued. China focused ETFs also had a positive bounce with VanEck Vectors China New Economy ETF (CNEW) returning 4.5% and VanEck Vectors ChinaAMC A-Share ETF (CETF) up 3.9%. The worst performers over the week were resources ETFs which were impacted by falling iron ore prices. BetaShares S&P/ASX 200 Resources Sector ETF (QRE) was down 4.2%. Year to Date best performers are Gold miners, property and China focused ETFs. VanEck Vectors Gold Miners ETF (GDX) is up 40.4% and of the worst performers only 10 ETFs are in negative territory. Looking longer term, twelve months to date the best performers are precious metal related ETFs. ETFS Physical Palladium (ETPMPD) is the best performer returning 76% and ETFS Physical Gold (GOLD) is up 37.2%. The worst performers are energy and oil ETFs. BetaShares Crude Oil Index ETF - Ccy Hedged (OOO) is down 18.1% over the period. Inflows for the week were seen mostly in GOLD as investors sought a safe haven given the global volatility over the last month. BetaShares FTSE 100 ETF (F100) also received heavy inflows from its recent launch. iShares Europe ETF (IEU) had outflows of 33.8 Million. Net flows for the ETF market were 77 Million, made up of inflows of 250 Million and outflows of 173 Million.

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ZUSD - It's All About The Benjamins

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Apr 08, 2019

Product in Focus: ZUSD: ETFS Enhanced USD Cash ETF Most portfolios hold cash to provide liquidity and downside protection Investors can seek to increase the return on their cash allocation using ZUSD Current US rates are significantly higher than Australian rate The deposit rate of ZUSD is currently 2.36% (as of 7 April 2019), enhanced by holding funds in deposits ranging from overnight to 3 months Cash Is King Defensive assets such as cash hold an important place in portfolios not only for liquidity but also downside protection. When you look at the typical asset allocation ranges for the five main risk profiles it’s clear what a critical part cash plays in a portfolio; now more than ever with many deeply concerned about the end of the equity cycle. However, many Australian investors only consider cash as AUD cash. This is understandable, but cash balances should be diversified in the same way as equities and fixed income. This gives the benefit of both diversification and, often, better yields. The ETFS Enhanced USD Cash ETF (ZUSD) achieves this for the low cost of 0.30% p.a. The United States Of Play The Federal Reserve has two main objectives. They are: Low and stable inflation over the long term (a target of 2% in the U.S) Full employment With both objectives looking stable in the current US economic environment Powell looks to be fulfilling his mandate and this has been reflected in the current Fed Target rate - set at a range of 2.25% to 2.5% - giving the market a strong indication that rates are likely to be unchanged for the remainder of the year and if on what looks like to be a small chance there is a change, it is likely to be in the form of a cut. He is unphased by short term misses of inflation targets and concentrates on long term trends. This resonates with his recent statement (March 2019) about the use of Monetary policy, he stated that: “We don’t see data coming in that suggest that we should move in either direction. They suggest that we should remain patient and let the situation clarify itself over time.” The Fed And The Reserve – Are They Kicking Goals? The current US yields are higher than the equivalent Australian duration. As you can see in the chart above the 10-year yields on government bonds are over 50 basis points better in yield terms in the US than Australia right now. Even with the yield curve displaying inverted characteristics, shorter duration US yields are better than the Australian equivalent. Current Market Deposit Rates For US And Australian Cash The cash rates on offer on US cash deposits are significantly higher even in the scenario that the RBA raises rates and the Federal Reserve holds. Even in the unlikely event that the RBA has consecutive increases (given inflation looks stable and economic growth looks late in the cycle) to the cash rate and the Fed held rates constant, the cash deposit rates on offer to investors could remain in favour of those with US deposits. In the graph below the spread between US and Australian deposits has been more beneficial to US deposits since March 2018. Product Solution Investors holding US Dollar Cash should be aware of the benefits of the ZUSD - ETFS Enhanced USD Cash ETF that achieves the following: Exposure to US dollar cash Enhanced yield Quarterly distributions ZUSD makes use of higher yielding deposits out to a term of 3 months in duration to help enhance the yield for investors in the fund. Using a combination of “at call”, 1M and 3M duration deposits ZUSD is designed to give investors an enhanced US dollar cash position rather than just holding exposure to the physical US dollar. Investors should consider diversifying their cash positions by holding non-domestic cash in addition to Aussie dollars via ZUSD.

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Europe Stacks up Despite Brexit

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Mar 14, 2019

Europe Stacks up Despite Brexit Product in Focus: ETFS EURO STOXX 50 (ESTX) Brexit uncertainty has impacted on investor sentiment towards Europe . However there are multiple indicators that the negativity around the rest of Europe has been overdone . EURO STOXX 50 up 9.4% year to date in line with S&P 500 . Europe will always be a core part of investor portfolios. Perhaps now is a good time to allocate? Uncertainty surrounding the protracted Brexit negotiations has seen many investors shy away from European equity markets in favour of higher returns in the US. Yet, with the US economy looking increasingly vulnerable to a slowdown, it might be time for your clients to refocus their sights on Europe – 20% of the world’s GDP. Why have Australian Investors Been Wary of Investing in Europe? Economic conditions in Europe have been surprisingly resilient throughout the political to-ing and fro-ing that has accompanied Brexit. European stock prices, however, have lagged their US counterparts. In 2018, the primary benchmark EURO STOXX 50 Index fell by around 14.3%, compared to a decline of just 6.2% by the S&P 500 during the same period. Poor performance by banking and auto stocks due to jitters around interest rates and tariffs, respectively, were the primary factors depressing European markets last year. Investor sentiment on Europe has been dampened by a range of factors. The cloud over Brexit, and its likely impact for the UK and continental Europe, is the obvious culprit. Ongoing budgetary conflict between Italy and the European Union, fears of an escalation in global trade wars and speculation on when the European Central Bank will raise rates, have also weighed heavily. But Do These Fears Stack Up? So far in 2019, it is a different story. The EURO STOXX 50 is up 9.4% year to date, tracking similarly to the S&P 500 (also up 9.4%) and relative valuations look more attractive. The euro is also approaching two year lows, which could provide a boost to Europe’s export sector. There are also suggestions that underlying economic conditions in the powerhouse economies of Europe are stronger than sentiment would suggest. This view is supported by the release earlier this month (March) of the Markit Eurozone Composite PMI numbers for February which were revised upwards to 51.9, the first increase (albeit slight) in private sector activity in three months. The PMI index tracks business trends across manufacturing and services based on data from over 5,000 companies. Another sign that the negative sentiment around Europe might have been overdone is the Citibank European economic surprise index. This index (which measures data surprises relative to market expectations) while still in negative territory, has been ticking upwards since the beginning of the year. Emotions Do Not Equal Facts The tendency for sentiment to run at odds with economic reality was raised recently by Martin Beck, chief economist at Oxford Economics. He spoke of the “the difficulty of separating emotion from hard economic developments in driving survey responses” during times of high uncertainty. A number of factors underscore the view that Brexit uncertainty is having a disproportionate impact on investor sentiment. Unemployment across Europe continues to fall and is at 10 year lows, wages growth has picked up and German retail sales rebounded in January, rising more than 3%. ….And What About BREXIT So how great are the Brexit risks for European stock performance? Certainly the economic fortunes of the UK are deeply entwined with those of the EU. The UK is among the EU’s three largest trading partners, accounting for about 13% of its trade in goods and services. While Brexit uncertainty has been damaging for both the UK and the Eurozone, the worst case ‘no deal’ scenario is likely to hit UK companies much harder than their European counterparts. The IMF has forecast that a no deal Brexit could result in a 4% hit to the UK’s GDP BY 2030 should Britain end up adopting the default World Trade Organisation rules for its trading relationships with the EU. The two countries with the largest weighting in the EURO STOXX 50 index, France and Germany by comparison are expected to suffer declines of only 0.2% and 0.5% of GDP, respectively. Meanwhile, a more benign Brexit scenario preserving access to the single market but not membership of the customs union would have only “negligible” impact on output and employment for the EU, according to the IMF. The ultimate consequences of Brexit for both the UK and Eurozone countries, however, are likely to take many years to materialise and will depend on whatever shape any eventual deal takes. Europe Without the UK - ETF Securities’ EURO STOXX 50® ETF As with any late cycle investment strategy, the key to any European foray is to focus on quality companies with strong earnings track records. To this end, Europe offers some of the world’s most prestigious blue-chip names. The EURO STOXX 50, includes the 50 largest and most liquid stocks operating in the Eurozone. The top 10 stocks in the EURO STOXX 50 Index (which is updated annually) are Total, SAP, Sanofi, Linde, Allianz, LVMH Moet Hennessy, Siemens, Unilever, ASML Holdings and Banco Santander. For investors looking to gain exposure to Europe, exchange traded funds offer a way to gain widespread diversification at a low-price. The ETFS EURO STOXX 50® (ESTX) offers broad based exposure to the 50 largest companies across the Eurozone by tracking the performance of the EURO STOXX 50 Index. For the year to date, ESTX is up 8.0% (in AUD). Source: Bloomberg data as at 11th March 2019

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Here's the Buzz around Megatrends

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Feb 18, 2019

Here’s the Buzz around Megatrends Products in Focus: The ETF Securities Future Present Range Q4 2018 saw high levels of volatility that particularly affected the tech sector and high beta areas of the market . YTD performance in 2019 has seen a rebound of many of these stocks . In this article we explore some of the key drivers of growth in the future . In the long term there is a positive outlook for technology, robotics, battery tech and biotechnology. At ETF Securities, we often talk about megatrends; disruption, displacement, game-changing and revolutionary technologies. Whilst it is easy to become cynical about the overuse of these terms, it’s clear that the pace of change is accelerating with no signs of slowing. Since 1956 there has been more than a trillion-fold increase in computing power where today the power of the iPhone 6 (an already outdated technology) could theoretically guide 120 million Apollo 11 rockets at once. Taking a step back, the greatest driver of this advancement is simply the enormous expansion in computing power. We now have capabilities to capture and analyse immense quantities of data, and this knowledge is being applied to a wealth of areas, with many of these technologies previously restricted to the realms of science fiction. The ETF Securities Future Present range gives investors a way to access disruptive technologies in a diversified manner. The range includes four funds targeting different sectors that are looking to have a greater presence in the future: TECH: ETFS Morningstar Global Technology ETF Once seen as a highly speculative investment, technology has now firmly cemented its place at the top of the S&P 500. It is fair to say that most people are highly dependent on leading tech firms that have become exceedingly integrated into our lives. We wake up, check the weather on our Apple iPhone, cycle to work on that (pricey) Cannondale and track the ride on our Garmin. Once at the office, the computer is booted up and Microsoft Office provides the tools to get us through the day. These technologies are ubiquitous and as such it is important to know the different ways of gaining exposure to the companies behind them. TECH holds a basket of 32 global technology stocks that have been identified using Morningstar’s moat methodology, meaning they have a competitive advantage over other similar businesses. With Morningstar’s active influence in this fund, it has outperformed the Nasdaq 100 since it was launched in April 2017. ROBO: ETFS ROBO Global Robotics & Automation ETF While the tech sector is dominating the present, it’s robotics, automation and AI (RAAI) that looks set to dominate the future. The outlook for growth in RAAI looks bright and with recent volatility providing increasingly attractive valuations in this sector, is now the time to consider to invest in this thematic? This year industry experts are pointing to improvements in network capabilities, particularly the roll out of 5G networks, aiding growth across the board, with the upgrade from 4 or 4.5G yielding as much as 10-100 time improvements in network speeds. These enhancements are instrumental in enabling the development and implementation of other technologies. Can you imagine using Netflix in the days of dial-up internet? Further penetration of manufacturing robots is also expected to occur as the automation of the workforce continues. Today’s China has approximately 1 robot per 100 manufacturing workers, with huge scope for growth if it’s to reach ratio’s in line with Germany and South Korea’s 6 per 100. These robots are performing monotonous tasks with high levels of precision and increasingly lower costs than their human counterparts, meaning companies will need to keep up with the levels of automation their rivals are using to keep up with the competition. ACDC: ETFS Battery Tech & Lithium ETF Global climate change and the move towards renewable energy is one of the most pressing issues of today and one of the key drivers of our success in addressing this issue will be in the development of energy storage. Imagine a world where battery technology is efficient enough to fly planes and feed power stations – this is the world companies behind this technology are striving for, and we’re already on our way with the explosion of electric vehicle development. But it’s not just electric vehicles making advances. In classic Musk fashion, Elon managed to make batteries the talk of the town in 2018 with his 100-day delivery of the Hornsdale Power Reserve battery in South Australia, currently the largest in the world. This drew attention for the necessity of pairing renewable energy generation with practical storage solutions. Whilst Tesla has had the first-move advantage in the electric vehicle (EV) market, it is rapidly being chased by established car manufacturers like BMW, Volkswagen and Nissan, who have equally ambitious goals to capture the growing consumer demand for green-transport. JP Morgan project EVs and Hybrid Electric Vehicles (HEVs) will account for 30% of all vehicle sales by 2025. CURE: ETFS S&P Biotech ETF Whilst biotechnology is arguably one of the oldest forms of technology, its prospects for future development are high. Since the first smallpox vaccine was administered in 1761, there have been huge advances in the biotechnology field. The sequencing of the first human genome in 2003 enabled a plethora of new biotech drugs to be developed. DNA sequencing has created hope for those previously suffering incurable diseases and has provided a quality of life where it was previously lost. At the time of writing 67 of the 119 stocks in CURE are either researching or producing diagnostic tools or drugs that treat cancer. Therapies are being developed for psychological disorders, inoperable tumours, chronic pain, hereditary diseases and degenerative illnesses. As an industry that is renowned for its volatility, biotechnology can be a particularly difficult sector to choose a winner. For the uninitiated, it is a realm full of highly specific medical jargon, tied up with regulatory barriers and inexplicable results to clinical trials. This is why CURE offers an equal weight and broad exposure to the biotech sector. And whilst it is difficult to know who will be responsible for the next breakthrough treatment, what we do know is that people will always pay for healthcare, especially as our aging population grows. This is an industry where success does not just mean more dollars in the bank, but lives saved, and families kept together. The Future is Now The examples above provide just a glimpse into the full scope of innovation that is captured by the ETF Securities Future Present Range. The future is now, and the way we live and work will continue to be defined by these mega trends. Accessing these sectors through a diversified, equal weight ETF allows investors to take a view on what trends will dictate the times to come.

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Gold 2019 Outlook

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Jan 21, 2019

Gold 2019 Outlook Gold had a positive return of 9.4% in 2018 2019 is looking to experience further geopolitical instability, particularly: US/China trade tension Continued uncertainty around Brexit Gold net non-commercial long contracts have been on the rise since October 2018 Does it take a market correction to see the value in gold? 2018 wrapped up in a storm of volatility. Markets up for the first three quarters and down thereafter through to late December. Consequently, leaving investors wary of what may be on the horizon. Though we have entered a fresh year, many of these volatility drivers still exist as they remain unresolved. Looking at the geopolitical landscape, 2019 is likely to present events that will continue to affect market sentiment. Trade tensions between the US and China remain, Brexit is fast approaching the original deadline and elections are upcoming in India, the EU and Australia, with all expected to play a role in shaping the year ahead. With this continued uncertainty, defensive strategies and diversification shall continue to be on the mind of many. How did Gold weather the storm? The tail of 2018 saw gold perform as a good hedge against equities. Whilst the S&P/ASX 200 dropped 7.8% from October to December end, gold netted a 9.6% gain in this same period (Figure 1), which indicates inclusion of gold into a portfolio for the period could have reduced volatility and downside risk Examining several major indices across 2018, ETFS Physical GOLD had a positive return of 9.4% whilst all major equities were in the red (Figure 2). Gold outlook for 2019 The outlook for 2019 performance will likely be impacted by a continuation of the global themes that dictated the close of 2018. In the World Gold Council’s “Outlook 2019: Economic trends and their impact on gold”, it has outlined three important drivers of gold demand: financial market instability, the impact of rates and the dollar and structural economic reforms The political instability that has enveloped the leading economies of the US and the UK is set to continue with markets responding to ongoing turmoil. The protectionist attitude of the US has encouraged inflation, with gold used by many to hedge against this. These movements have heralded a renewed interest in gold which can be seen on multiple fronts. Net positive flows into ETFs have occurred for the previous three months, though Asian markets (including Australia) have lagged Europe and America on this front. Futures have also pointed to change in sentiment towards gold. Net non-commercial long contracts have been on the rise since October 2018, reversing the downward trend seen throughout 2017 and most of 2018 (Figure 3). The bearish view of gold suggests that performance could be constrained by a strong US dollar and rising interest rates. Addressing these points; the significant price movements of the dollar in recent weeks makes the price outlook of the dollar particularly tricky to predict. Examining the relationship between gold and interest rates, these have seen a degree of positive correlation in the past although not to a particularly significant degree. Finally, economic reform is expected to continue across China and India in 2019. As the greatest consumers of physical gold (through both investment and jewellery), economic growth in these regions will likely impact the precious metal. Further economic development and particularly the increase of wealth in India and it’s growing middle class is likely to continue to drive demand. On balance key indicators that have dictated the previous performance of gold suggest that we are likely to see a continuation in the upward trend of both investment flows and price of gold. Investors wanting to access gold may be interested in the benefits of exposure through investing in gold miners’ equities. Whilst this strategy gives the potential to receive dividends it does not offer the same exposure of a physical gold ETF such as GOLD as the price changes in gold miners can be quite different from the movement of gold price. The mining industry has recently garnered attention due to large M&A movements. Significantly Goldcorp will be acquired by Newmont Mining in a US$10bn deal. Subsequent to this announcement Newmont’s share price dropped 11% overnight. For investors who are utilising gold as an event risk hedge, other factors such as M&A activity can have unexpected effects on gold miner’s share prices. Therefore, a direct exposure to physical gold will eliminate exposure to stock specific risks.

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Why aren't you looking at Gold?

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Jan 08, 2019

GOLD 100% physically backed Highly recommended by Lonsec Recommended by Zenith Key features of Gold: Can materially reduce risk in portfolios The best-known hedge against the business cycle Outperformed cash since the 1800s Hedge against geopolitical events Global trends around Gold investment: Global Gold ETF investment flows have moved to positive for the first time since May 2018 Central banks have increased buying of gold to the highest level since the end of 2015 Gold is the world’s oldest financial asset and has been used for centuries in transactions and as a store of value. However, many Australian investors are hesitant to allocate assets to gold, with the lack of yield being a common concern. We believe investors should consider the role of gold in a portfolio, particularly with the recent volatility being experienced across the globe. Key features of gold 1. Gold can reduce the risk of a portfolio The most efficient portfolio is one that takes the least risk while making the highest return. Risk can be reduced by diversifying across and within asset classes based on low or negative correlations. Gold has low or negative correlations with traditional asset classes making it ideal as a risk reduction tool. 2. Gold has outperformed cash since the 1800s In a review of every major US asset class, Jeremy Siegel, a professor of finance at the University of Pennsylvania, found that gold provided investors with a real return of 0.5% from 1802 to 2016. He found that while gold was beaten by bonds and equities, gold outperformed cash, with cash delivering a negative real return of -1.4%. 3. Gold acts as a hedge against geopolitical events Gold has had an historical tendency to rise during times of crisis and turbulence. This means gold can provide something like an ‘event hedge’ – or the chance to reduce the impact of ‘black swan’ type events which, while relatively uncommon, can have a strongly negative impact on a portfolio. Taking the well-known example of the GFC (below) it can be seen that the difference between gold and the equity markets one year on from the credit crisis was 35% in favour of gold. Global trends of Gold investment Recent global movements have shown many investors are reallocating to gold. On this front Australia is lagging behind global trends with other regions showing a greater propensity for an allocation to gold. We have seen this increased appetite for gold emerging on multiple fronts: Gold ETF investment flows have moved to positive for three consecutive months (October-December) with 3% growth in ETF holdings in 2018 The total value of global gold backed ETF holdings in now over $100bn for the first time since 2012 Central banks have increased their buying of gold to the highest level since the end of 2015 What does gold look like in a portfolio? To demonstrate the effect of gold in a portfolio we have simulated the past performance of a series of Vanguard “LifeStrategy” funds with and without a 10% allocation to gold. Simulations were run over a 15-year period (since inception of ETFS GOLD). These funds provide an all-in-one portfolio made of globally diversified blends of equity and bonds (proportion equities & bonds indicated in charts below). In every case, the portfolio including a 10% allocation to GOLD outperforms and has lower beta and standard deviation indicating a lower risk. Based on this it’s clear gold does exactly what it’s meant to do from an investment perspective and we believe that many Australian investors are ignoring these risk reduction properties. Conclusion Gold is the oldest known store of value and has been continuously used for this function for centuries. We have demonstrated above the key features of gold that make it an appealing option for some investors. Gold’s low and negative correlations with other asset classes have seen it perform as an effective hedge in previous bear cycles and during global geopolitical events that have negatively affected other asset classes. Simulated data also demonstrates how this diversification can function in a hypothetical portfolio to reduce risk and increase returns.

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