Gold dropped from Ecclesiastical fund on slowing QE fears

The Bank of England’s decision not to expand its programme of quantitative easing has prompted Robin Hepworth, the manager of the £192 million Ecclesiastical Amity International  fund, to ditch the portfolio’s gold exposure.  

Gold, traditionally viewed as an inflation hedge, had made up the biggest position within the Citywire Selection listed global equities fund, with Hepworth holding 3.8% of the fund in ETFS Physical Gold . 

The gold holding had been initiated in October 2010 and has rewarded Hepworth handsomely over the past two years, realising a profit of 28%, over a time period in which the FTSE All Share has returned just 1%.

Hepworth sold the ETF after the decision by the Bank of England’s monetary policy committee not to extend its stimulus programme when the £375 billion worth of purchases ran out earlier this month.

He believes that any reduction in additional money printing – seen as inflationary – will have a negative impact on the gold price.

He told Citywire: 'I made this call on the back of the recent MPC meeting, where it was decided not to support a further round of quantitative easing. I believe the effectiveness of QE has been, and will increasingly be questioned.'

Hepworth also cast doubt on whether the US Federal Reserve would be able to continue with its plan to maintain QE over the next two to three years.

'The recent strength of the US dollar shows that the forex markets are also not convinced the Fed will fulfill its pledge to maintain QE through to 2015.'

Hepworth told Citywire that he would now look to patiently recycle the cash into new positions in selective South East Asia stocks which he believes to have more attractive growth prospects.

'Proceeds from the sale are held in cash which now represents 8.5% of the portfolio. There are no immediate plans to reinvest though attractive opportunities continue to be found in South East Asia nations including Thailand and Malaysia.'

Over five years to the end of October, the fund has returned 19% compared to 15.3% by the FTSE World Index.