GOLD AND PRECIOUS METALS CHARTERIS: Boutique fund mines rich vein of profits thanks to skyrocketing gold price

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

Although it manages around £100m of its clients’ money, it struggles to gain recognition for the funds it manages.

One, Premium Income, was dissolved last month after it failed to gain enough traction from investors, while two others (Global Macro and Strategic Bond) have combined assets of just £11m. Charteris says there are no plans to liquidate them.

The jewel in Charteris’ crown is Gold & Precious Metals, a £20m fund that is exploiting a rich vein thanks to rising gold and silver prices. The price of gold is close to reaching an all-time high, trading at more than $2,700 an ounce, a result in part of continued tensions in the Middle East, the impending US elections and heavy buying from Asia.

The price of silver has also increased over the past year by 46 percent in dollar terms (gold is up more than 40 percent).

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

Over the past year the fund generated a strong investor return of 49 per cent, but manager Ian Williams, also chief executive of Charteris, believes there are more returns to be had.

He says China’s continued divestment from US Treasuries and gold will drive up the price of the metal. “We’re nowhere near the top,” he says. “The tailwinds driving the price are strong.”

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

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

While Charteris has the distinction of being a gold and precious metals specialist, its portfolio is skewed towards silver mining companies.

Williams says: ‘If you look back over the last 50 years, silver has traded at a price equivalent to two per cent of the price of gold. Currently, it is trading around 1.2 percent. That suggests silver could reach between $50 and $60 an ounce. It is currently trading at just under $33.

The manager also likes the fact that the silver market has a structural deficit, which causes a mismatch between supply and demand, which drives up prices.

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

There are many rival funds, including those run by BlackRock (Gold & General), Jupiter (Gold & Silver) and Ruffer (Gold). Investors who prefer a fund where returns directly track the price of gold or silver should consider iShares Physical Gold and iShares Physical Silver.

Ongoing charges on Charteris Gold & Precious Metals total 1.36 per cent. “It’s a diversifier for your investment portfolio,” Williams says. “An investor should not have zero exposure to commodities, but they should not have 100 percent exposure either.”