Gold funds on the move, but we’ve resisted temptation to buy
28th February 2022 14:04
by Douglas Chadwick from ii contributor
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Gold is viewed as a safe-haven asset and its price has been rising in response to Russia invading Ukraine. Saltydog, however, is yet to take the plunge.
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At Saltydog Investor, we believe people should actively manage their investments and react to changing market conditions, rather than accepting the ‘buy and hold’ approach favoured by many financial advisers.
What I have never really understood is, if it is such a bad idea to try to time the markets, which is what we are told as private investors, then how come the large financial institutions are trading trillions of dollars each day? Is it one rule for them and another for us?
We review our investments each week, but do not necessarily make changes. We are not day traders; we just think it is prudent to keep a regular eye on our holdings and make adjustments when necessary to make sure that we are still on track. Sometimes we may be forced to react to situations outside of our normal routines, but these occasions are few and far between.
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Last Wednesday, when we were reviewing the numbers for the previous week, I started my commentary for our members by saying: “As tensions mount on the Ukrainian border, stock markets have continued to slide backwards...” At the time, I did not think that within 24 hours the Russians would have invaded.
It is shocking to think that there is now war in Europe again. Hundreds of people have already died and soon it could be thousands. I hope that world leaders can negotiate an early end to hostilities. With Vladimir Putin publicly announcing that he has put Russian nuclear forces on alert, it looks as though their work will be cut out.
At times of political uncertainty, you tend to see more volatility in stock markets and that has been the case over the last week. However, we did not make any changes to our demonstration portfolios last Wednesday, and we have not felt the need to make any changes in the immediate aftermath of the invasion.
In my last portfolio update to our members, I said: “Both portfolios are holding significant amounts of cash (70% in the Ocean Liner, 90% in the Tugboat) and it's hard to think where else you would rather be.
“Over the last few weeks, we have seen most sectors making losses - even the money market funds (basically cash or cash equivalent securities) have gone down.
“The best-performing sector in the 'Slow Ahead' Group, over the last four weeks, is Targeted Absolute Returns with a four-week loss of 0.6%. The worst-performing sector in this group is £ Corporate Bonds, down 2.9%.
“In the 'Steady as She Goes' Group, the range goes from Property, with a four-week loss of 0.6%, to UK Smaller Companies, which is down 6.4%.
“All the sectors in the two 'Full Steam Ahead' groups are also showing losses over four weeks. The best, global emerging markets, is down 1.1%, while the worst, European Smaller Companies, has lost 5.6%.
“At times like this, cash seems like a very sensible option even if it is getting eroded by inflation.”
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Although most sectors have been going down for some time, which is why our cash holdings are so high, there are some funds that have been bucking the trend. Most come from our Specialist sector, which also includes the new 'thematic' Investment Association (IA) sectors like Latin America, Healthcare and Natural Resources & Commodities. We prefer to use our old SubZones, where we also break out funds investing in areas such as Gold and Russia & Eastern Europe.
Our latest analysis, which only goes up until 19 February, shows a number of funds making reasonable gains over the last month.
| Fund | SubZone (If Applicable) | 4 Week | 12 Week | 26 Week | ||||
| Decile | Return | Decile | Return | Decile | Return | |||
| Liontrust Latin America | Latin Am | 1 | 7.9% | 1 | 11.1% | 6 | -4.1% | |
| ASI Latin American Equity | Latin Am | 1 | 5.9% | 1 | 13.5% | 5 | -0.7% | |
| Threadneedle Latin America | Latin Am | 1 | 5.8% | 2 | 8.6% | 10 | -14.0% | |
| SVS Sanlam Global Gold & Resources | Gold | 1 | 5.5% | 2 | 5.3% | 1 | 14.0% | |
| BlackRock Gold and General | Gold | 1 | 5.4% | 3 | 5.2% | 2 | 13.7% | |
| Ninety One Global Gold | Gold | 2 | 5.2% | 2 | 5.3% | 1 | 14.3% | |
| Invesco Latin American | Latin Am | 2 | 4.6% | 2 | 11.0% | 3 | 3.3% | |
| TB Guinness Global Energy | Nat Res | 2 | 4.5% | 1 | 16.2% | 1 | 45.2% | |
| JPM Natural Resources | Nat Res | 2 | 4.3% | 1 | 16.7% | 1 | 30.1% | |
| LF Ruffer Gold | Gold | 2 | 4.2% | 5 | -3.4% | 2 | 8.3% | |
| BlackRock Natural Resources | Nat Res | 2 | 4.2% | 1 | 15.1% | 1 | 30.1% | |
| Barings Global Agriculture | Nat Res | 3 | 4.1% | 3 | 5.1% | 2 | 12.3% | |
| Liontrust Russia | Russia | 3 | 2.5% | 9 | -10.0% | 8 | -7.8% | |
| Stewart Investors Latin America | Latin Am | 3 | 2.0% | 2 | 5.9% | 4 | 1.9% | |
| Pictet-Biotech | 3 | 1.2% | 10 | -19.3% | 10 | -19.6% | ||
| Invesco Emerging European | Russia | 3 | 0.4% | 7 | -6.5% | 8 | -7.9% | |
| ASI Eastern European Equity | Russia | 3 | 0.3% | 9 | -11.6% | 10 | -12.1% | |
Data source: Morningstar. Past performance is not a guide to future performance.
At the top of the list are funds from the Latin America SubZone. We have seen this trend developing for a little while and invested in one of these funds at the beginning of the month. Unfortunately, we chose the Stewart Investors Latin America fund. Since then, it has lagged the other funds in this SubZone, but we are hoping it will recover.
The leading funds over 26 weeks have been TB Guinness Global Energy and JPM Natural Resources, and they have also done pretty well over four and 12 weeks. They also feature in our portfolios.
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Last week, we also saw funds from our Gold SubZone moving up the table. Three funds, SVS Sanlam Global Gold & Resources, which used to be Smith & Williamson; BlackRock Gold and General; and Ninety One Global Gold, which used to be Invesco, were all showing four-week gains of over 5%.
Gold is currently trading at around £1,910 per oz, just below the 2011 high of £1,920. Last week, it briefly went as high as $1,974 but then dropped back. In the past, gold has been seen as a safe haven and can do well in times of global unrest, but it is volatile. We resisted the temptation to invest last week, we will review the situation again in the next few days.
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