Gold ETPs and metals funds will benefit the most from positive flows into the commodities sector this year, with an ESG focus crucial to maximising inflows, research from European ETF provider Tabula Investment Management Limited (Tabula ETF) shows.
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Michael John Lytle, CEO of Tabula
The study by Tabula found 84% of professional investors expect positive flows into the almost US$90 billion European-listed physical gold ETP sector this year. Around 17% of those asked expect these flows to be “strong”.
The attraction of metals for diversification is the main reason for increased allocations according to 61% of investors, while 48% say increased competition is driving interest. Around 44% point to an increased focus on sustainability and ethical sourcing.
The research of 200 gold investors at European pension funds, wealth managers, insurers and family offices, responsible for over €800 billion in assets under management, showed strong optimism about allocations to metals investment vehicles in general over the next two years.
Around 67% of investors questioned in the UK, Germany, Switzerland, France, Italy and the Nordics predict dramatic increases in allocations to funds focusing on metals and metal miners, while 41% predict dramatic increases in allocations to physical commodity exchange-traded products as the table below shows.
| How will allocations change over next two years | Funds focusing on metals/metal mining companies | Physical commodity ETCs/ETFs | Metal mining company stocks | Bullion |
| Increase dramatically | 67% | 41% | 32% | 24% |
| Increase slightly | 19% | 39% | 49% | 36% |
| Stay the same | 9% | 11% | 13% | 32% |
| Decrease | 4% | 2% | 5% | 1% |
| Don’t know | 1% | 7% | 1% | 7% |
The study for Tabula, which recently announced the launch of an ESG-focused physical gold ETC, the SMO Physical Gold ETC (Bloomberg: BARS LN), found the key factor for investors allocating to a new gold ETC is its ESG focus. The ability for investor to trace where the gold in an ETC has come from ranks ahead of product fees or whether it offers physical or derivative exposure.
In terms of switching between exchange-traded gold products, the focus on ESG and ESG credentials is the second most important factor, behind physical or derivative exposure and ahead of physical delivery and product fees.
Nearly 90% of investors believe less than half of the gold held in physical gold ETCs is traceable to source, the research found.
The SMO Physical Gold ETC is the first exchange-traded physical gold product to offer full traceability of gold bars from mine to vault. It holds no gold of Russian origin, does not source gold from controversial mines or miners, and holds no gold that is “recycled” or of unknown provenance. Importantly, no mercury is used in the extraction of the gold held by BARS.
“The gold sector and metals in general are expected to benefit from positive flows this year and next, with metals and mining funds and commodity ETCs set to see the strongest flows,” says Tabula CEO Michael John Lytle.
“The attraction of the sector for diversification is the key draw for listed gold products, but the sector’s focus on ESG and ability to deliver for investors on that front is becoming increasingly important.”
Tabula CIO Jason Smith added: “Our research shows that for many investors, ESG credentials are an important factor for competition among gold ETCs. Responsible sourcing and traceability are issues that need to be addressed if a provider is serious about ESG.”
Source : ETFWorld.co.uk
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