The Dynamic Precious Metals Fund, which beat 82% of its peers this year, sees gold as a “nice safe” bet heading into the U.S. election in November, according to portfolio manager Robert Cohen.
The precious metals-focused fund climbed 63% this year by mainly investing in gold- and silver-exposed equities, beating most of its peers, according to data compiled by Bloomberg. Dynamic Funds is a subsidiary of Bank of Nova Scotia.
Aside from Covid-19 uncertainties, the U.S. election is “probably the most contentious U.S. election since the Civil War,” which will likely destabilize the U.S. market briefly regardless of who wins, Cohen said. “I’m not sure how heavily I want to be invested heading into the election,” he said, adding that gold would be a safe bet.
Investors have flocked to safe-haven assets amid massive central bank stimulus and lower real rates, sending gold surging to record levels this year. Bullion hit an all-time high in August before falling sharply. This roller-coaster ride had some market participants speculating that gold could be a bigger bubble than surging tech stocks.
Amid this volatility, the Toronto-based fund has outperformed the gold price and the S&P/TSX Composite Gold Index this year. Cohen’s fund manages risk by investing in a diverse range of precious-metal equities including producers, developers and explorers from different regions of the world, rather than “just picking a bunch of producers off by market cap.”
Cohen also thinks this strategy is one of the reasons why his fund’s risk is better managed than its peers. “Our down-capture ratios are superior to our peer group because of where and what we invest in,” Cohen said. The fund has about C$745 million in assets under management, according to Bloomberg data.
Looking forward, Cohen thinks gold’s bullish sentiment is here to stay due to some “very impactful” events around the world, including the devaluation of currencies.
“Given the amount of debt in the world, the only politically acceptable way to get out of debt is to literally print your way out of it, which effectively devalues the currency and we’re going to see that continue,” Cohen said. In such a scenario, putting money in a safe-haven asset such as gold ensures stable purchasing power for the longer term, Cohen added.
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