Ninety One Global Gold fund page

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Ninety One Global Gold

IA Sector:

Specialist

Asset Manager:

Ninety One

Asset Manager Website:

www.ninetyone.com

Asset Manager Factsheet:

The fund invests in companies that are involved in the mining and production of gold and precious metals. The team uses a rigorous and data-rich investment process. The fund represents an effective way to gain exposure to primarily gold shares Within its sector, the fund features in the 'Equities, All-Cap, Gold & Precious Metals' category.

Opinion, Characteristics & Utility

Opinion

This Recommended fund is managed by George Cheveley, who has been a member of Ninety One’s Natural Resources team since 2007.
The team uses a rigorous and data-rich investment process, working according to a common approach and sharing their expertise.
This is a benchmark-aware approach, but one which has historically benefited from an element of dynamic investment between small and large companies.

Characteristics & Utility

The fund is an effective way to gain exposure to primarily gold shares. As a general comment, gold-related investments can be used in portfolios as a risk offset, or as an inflation hedge. However, gold shares are inherently volatile and any allocation should be made on the understanding that significant drawdowns are likely to be a feature of the investment journey.
Gold share prices typically respond to changes in the gold price, but investors should be aware that there are also periods when they are less closely correlated.
Many of the gold equity indices feature dominant weightings in the large-cap miners. Therefore, large share price moves for these stocks can have an outsized impact on index returns. This fund offers a more diversified way to invest in the breadth of gold and precious metal stocks, but, given the index structure, investors should be prepared for variability in its relative performance. Furthermore, given its quality threshold, it can lag the index when the share prices of junior miners are rallying strongly.

Risk Commentary

The fund’s KIID Synthetic Risk and Reward Indicator (SRRI) is 7. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 7 means the fund’s historic volatility is greater than 25%.

The fund’s risk score reflects the volatile nature of gold share prices. They are typically highly correlated to the underlying price of gold. We would also highlight the potential drawdowns that have traditionally been associated with investing in gold shares, where losses have exceeded 50% in past peak to trough declines. Different share classes could have differing SRRI scores.

Description

Investment Team

The fund is managed by George Cheveley, a portfolio manager and metals and mining specialist in Ninety One’s Natural Resources team. Mr Cheveley leads the global gold strategy, working closely with portfolio manager Daniel Sacks, who has been involved with the fund since its launch in 2006. Mr Cheveley also engages with the firm’s 4Factor global equity team, based in London and Cape Town.

Investment Philosophy

The team believes that companies which can generate a superior return on capital will outperform through commodity cycles. This is because the inherent cyclicality of a natural resources company’s earnings means that efficient capital allocation is critical. Such companies should be able to grow the value of shareholder equity over time, as well as distribute cash and, hence, the team’s efforts are concentrated upon acquiring detailed knowledge of individual companies, together with a technical understanding of commodity price fundamentals.

Portfolio Construction & Risk Controls

The portfolio is relatively concentrated, with 30-50 positions. It may hold up to one-third in non-gold producers; primarily, this incorporates allocations to other precious metals and direct investments in the underlying commodities. They are prepared to hold up to 10% in a company that they particularly like. The portfolio is subjected to the firm’s governance and oversight process.

Investment Process

The process deployed by the team is framed around the elements of screening, fundamental analysis, portfolio construction and engagement. The screening stage has three components. An economic screen helps them to quantify the macro-economic factors impacting different commodity markets. There is also a commodity scorecard, whereby several elements, such as supply and demand, trade flows and cost curves, are assessed and scored. Finally, an equity screen ranks stocks on a number of valuation and return metrics.

The fundamental part of the process incorporates the analysis of commodities and companies. On the commodity side, they use detailed information to build supply and demand models for each commodity, which helps them to forecast medium and long-term price trends. On the stock side, they use in-house models to determine company earnings and valuations. They also meet management teams and conduct site visits. In setting price targets, they assess a company’s commodity price sensitivitity, as well as discounting the target stock price for risk factors such as leverage, volatility and ESG considerations.

The best ideas are put forward for consideration by the team. In constructing the portfolio, positions are weighted according to their risk-adjusted target prices and the contribution to the portfolio’s risk.

Key Fund Facts

Inception Date:

10 April 2006

Manager(s) (Since):

George Cheveley (Apr 15)

Fund Domicile:

United Kingdom

Base Currency:

US Dollar

Fund Benchmark:

NYSE Arca Gold Miners*

IA Sector:

Specialist

*Prior to 1st April 2018, the index used was Euromoney Global Gold.

Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.