ETF Securities launches sterling and euro-hedged physical gold ETC
ETF Securities has launched the ETFS GBP Daily Hedged Physical Gold on the London Stock Exchange, to be followed imminently by the ETFS EUR Daily Hedged Physical Gold on Deutsche Boerse.
The new currency-hedged investment solutions complement the firm’s current physical gold product range by offering an inbuilt daily currency-hedging mechanism, mitigating the effect of currency volatility in investors’ portfolios, a statement said.
ETF Securities listed the world’s first exchange-traded gold product in 2003 and now more than $18bn of the firm’s assets reside in products that track the spot price of gold.
Gold remains a core holding for investors concerned about current market uncertainties. In 2012, investors around the world allocated a total of $2.5bn in net new assets into the firm’s physically-backed gold products.
The new products give euro and sterling investors direct exposure to physical gold, while mitigating the effects of currency volatility by reducing exposure to the dollar.
The products track the performance of the Morgan Stanley Long Gold British Pound Hedged Index and the Morgan Stanley Long Gold Euro Hedged Index calculated and published by Morgan Stanley & Co. LLC. These indices aim to reflect the hedging of foreign exchange risk with respect to GBP and EUR.
By hedging the currency of their asset returns into their home country liabilities, currency hedged ETCs help offset the natural currency risk to which an investor in non-local currency assets is exposed.
This is particularly useful for investors with specific local currency return mandates. Currency hedged ETCs also allow shorter-term tactical investors to increase their returns by choosing the currency of their exposure.
The daily hedged physical gold securities swap are also re-set daily. An ETC which tracks an index that hedges currency risk on a daily basis will tend to be more accurate in providing returns that reflect true underlying asset returns than those that hedge on a monthly basis or only reset the swaps on a monthly basis.
In response to investor demand, ETF Securities is also hoping to shortly make ETFS EUR Daily Hedged Physical Gold available on Borsa Italiana.
Matt Johnson, head of Distribution, EMEA, ETF Securities recent global monetary policy has the potential to cause significant currency movements. “Our currency-hedged Physical Gold investment products provide a transparent and cost-efficient exposure to physical gold whilst mitigating unwanted currency exposure. Their small denomination of gold (1/100 ounce vs 1/10 ounce) also make them more accessible for investors.”
ETFS GBP Daily Hedged Physical Gold and ETFS EUR Daily Hedged Physical Gold are issued by Jersey based ETFS Hedged Metal Securities Limited.
The products are backed by physical metal held in custody by JPMorgan Chase Bank and Morgan Stanley & Co International plc acts as the swap contract counterparty to ETFS Hedged Metal Securities Limited in respect of the currency hedge.