Interactive Investor

Gold is the secret weapon of top ISA investment funds

19th August 2020 14:36

Laura Miller from interactive investor

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The price of the precious metal has soared in 2020, but research shows gold has propped up the best ISA funds for far longer.

The five top-performing ISA investment funds over the past year have all been dominated by gold, according to research by Savers Friend.

The top five ISA unit trust funds for a £1,000 investment in the 12 months until August 2020 are:

LF Ruffer Gold Account, return £1,604.50
Baillie Gifford American A Account, return £1,535.96
Ninety One Global Gold A Account GBP, return £1,454.86 
Blackrock Gold & General A Inc, return £1,339.93 
Smith & Williamson Global Gold & Reserve Account, return £1,319.38

The price of gold has risen sharply since the start of 2020 when the full impact of the coronavirus pandemic started to become clear and global stock markets reacted with deep falls. An ounce of gold today costs £1,504, up from £1,244 in February, an increase of 21% in six months.

Since April, in line with the rising gold price, there has been a sharp rise in investing in equities of companies within the mining and gold/precious metal industries. Funds in this sector have also been among the top performers in the past 12 months.

The best-performing ISA unit trust fund over the last year, the LF Ruffer Gold Account, has a 340% growth rate over the past five years. It invests mostly in gold and precious metals-related businesses, and in the mining industry. The fund has a 1.24% management charge.

The next two best funds for returns in the short-term, the Baillie Gifford American A Account and the Ninety One Global Gold A Account GBP, were also in second and third place last month. 

The Ninety One Global Gold A Account GBP, at £376 million, is a smaller fund compared to the higher-placed Baillie Gifford and LF Ruffer funds. It invests in companies involved in gold mining, and its fund management fee is 0.84%. The fee for the Baillie fund is 0.51%.

Research by gold trading platform BullionVault into its users found they typically hold 5-20% of their self-managed assets in precious metals. 

Adrian Ash, director of research at BullionVault, says:

“Their main motivation is fear of currency debasement and inflation, with the aim of spreading risk by diversifying their other investments a close second. More than a third believe monetary policy will now have the single greatest impact on the underlying direction in gold.”

interactive investor found gold accounted for 1.73% of its average stocks and shares ISA accounts by 31 July 2020. This was up from 0.85% at the end of last year and 1.19% by 31 March 2020.

Gold becomes attractive during periods of low interest rates as an alternative to government bonds, the yields of which suffer when rates are low.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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