Precious metals have long been considered a way for investors to diversify their portfolios.
For investment purposes, they have low or negative correlations with the stock and bond markets, reducing risk and offering protection against volatility. On the inflation side, these metals have intrinsic value that is not tied to economic growth, are tangible assets that don’t carry a credit risk and are in limited supply.
But investing in precious metals as bullion is a cumbersome process — not everyone has a place to store physical metal, and paying for storage can eat into profit value. Holding actual metal may also not provide enough liquidity.
For that reason, many market participants turn to vehicles like exchange-traded funds (ETFs). These convenient products provide exposure to precious metals without the need to physically store and own the commodities.
Here’s a quick look at the five largest precious metals ETFs on the ASX by assets under management as of November 5, 2021. Read on to learn more about them and if they could be a fit for your portfolio.
1. ETFS Physical Gold (ASX:GOLD)
Assets under management: AU$2.18 billion; year-to-date return: -2.64 percent; current share price: AU$226.34
The largest precious metal fund by a wide margin, the ETFS Physical Gold is also one of the oldest. Admitted to the exchange in 2003, this fund provides a return equal to the price movement of the Australian dollar price of gold (with a 0.4 percent management fee per annum). The fund is backed by bullion held by JPMorgan (NYSE:JPM) in London. It also offers an option for investors to redeem their holdings for AU$1,000 per request.
2. Perth Mint Gold (ASX:PMGOLD)
Assets under management: AU$575.6 million; year-to-date return: -2.16 percent; current share price: AU$24.27
Coming in second in size is another gold ETF, Perth Mint Gold. The fund, managed by the Australian government’s Perth Mint, is an option for investors who like the appeal of buying government-backed gold. Investment is also underpinned by the Perth Mint’s bullion bars and is physically redeemable. The fund has one of the lowest management fees, coming it at 0.15 percent, and it has weathered this year better than its peers, with a year-to-date return of -2.16 percent. The fund has an 8.22 percent annualised return since inception.
3. BetaShares Gold Bullion ETF (ASX:QAU)
Assets under management: AU$295 million; year-to-date return: -9.51 percent; current share price: AU$16
BetaShares has a long history of managing ETFs on the ASX, and its gold bullion ETF is just one of the more than 60 ETFs the company runs. The company is an Australia-based and operated ETF provider. Its gold ETF was launched in 2011 and has had an annual return of 1.17 percent since inception. The fund’s physical bullion is also held by JPMorgan in London and it has a 0.59 percent management fee.
4. ETFS Physical Silver (ASX:ETPMAG)
Assets under management: AU$206.2 million; year-to-date return: -13.5 percent; current share price: AU$30.27
Sister to ETFS Physical Gold, ETFS Physical Silver has many of the same features with a smaller size. Backed by physical silver held by JPMorgan in London, this fund also has a slightly more expensive management fee at 0.49 percent per annum. ETFS Physical Silver has a logged a 14.19 percent return in the last three years.
5. ETFS Precious Metals Basket (ASX:ETPMPM)
Assets under management: AU$27 million; year-to-date return: -8.26 percent; current price: AU$195
ETFS Securities has a diversified precious metals basket for those investors who don’t want to have exposure to just a single metal. This fund offers returns from four precious metals: gold, silver, platinum and palladium, with physical assets held by JPMorgan in London. Each unit of the ETF comes with an entitled amount of physical bullion, and the management fee is paid depending on the entitlement. The fee ranges from 0 percent per annum for gold to 0.49 percent for silver, platinum and palladium.
Don't forget to follow us @INN_Australia for real-time news updates!
Securities Disclosure: I, Pallavi Rao, currently hold no direct investment interest in any company mentioned in this article.
Precious metal ETFs haven’t had the best year, but it’s still worth knowing about the biggest players in the ASX market.