CHARTERIS GOLD & PRECIOUS METALS: Boutique fund mines rich profits from rising gold prices

London-based Charteris is a boutique asset manager that celebrated its 40th anniversary this year.

Although it manages around £100m of client money, it has struggled to gain recognition for the funds it manages.

One of these, Premium Income, closed down last month after failing to gain sufficient investor support, while two others – Global Macro and Strategic Bond – have a combined assets of just £11m. Charteris says there are no plans to complete this.

The jewel in Charteris’ crown is Gold & Precious Metals, a £20 million fund that is mining a rich vein thanks to rising gold and silver prices. The price of gold is near an all-time high, trading at more than $2,700 an ounce – partly due to ongoing tensions in the Middle East, the looming US election and strong buying from Asia.

The price of silver has also risen by 46 percent in dollars over the past year (gold has risen by more than 40 percent).

Like most commodity investment funds, Charteris does not invest directly in metals. Instead, it buys shares in the companies that mine gold, silver and other precious metals.

Over the past year the fund has delivered a strong return for investors of 49 per cent, but manager Ian Williams, who is also CEO of Charteris, believes there is more return to be achieved.

He says China’s continued divestment from U.S. Treasuries and gold will push the metal price higher. “We’re still a long way from being at the top,” he says. “The tailwind driving the price is strong.”

He also believes that the recent meeting of so-called BRICS countries in Russia will increase its price.

Member states agreed to increase trade in precious metals among themselves and to establish an exchange that could rival those in the West, such as the London Metal Exchange. Although BRICS stands for Brazil, Russia, India, China and South Africa, it now also includes Egypt, Ethiopia, Iran and the United Arab Emirates. Saudi Arabia has yet to make a final decision on accession.

Although Charteris is known as a specialist in gold and precious metals, its portfolio is mainly focused on silver mining companies.

Williams says: ‘Looking back over the past fifty years, silver has traded at a price equivalent to two percent of the price of gold. The price is currently trading around 1.2 percent. That suggests silver could rise between $50 and $60 an ounce.” It is currently trading at just under $33.

The manager also likes that the silver market has a structural shortage, which leads to a mismatch between supply and demand, causing prices to rise.

The fund has 25 holdings, most of which are listed in Canada and the US. The largest is Canadian-listed AYA Gold & Silver. “The name of the company is a bit of a misnomer,” Williams says. “It’s essentially a silver mining company with a major operation in Morocco. It is well managed and has the potential to increase production.”

Competing funds abound, including those from BlackRock (Gold & General), Jupiter (Gold & Silver), and Ruffer (Gold). Investors who prefer a fund whose returns directly track the price of gold or silver can check out iShares Physical Gold and iShares Physical Silver.

Running costs for Charteris Gold & Precious Metals total 1.36 percent. “It’s a diversification of the investment portfolio,” Williams says. ‘An investor should not have zero exposure to commodities, but neither should it have 100 percent.’