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Trust Insider: gold minnows for a mining recovery
by James Carthew on Feb 25, 2014 at 00:01
From launch to the end of January 2014 ARC’s NAV has fallen by 17.6% (and investors who came in at the second and third fund raisings will have done even worse) but this performance is a lot better than the FTSE Gold Mines Index (off 44.1%) and the S&P/TSX Gold Index (off 38%) so it seems as though the managers have done a good job.
What is more interesting though is that, since launch, the gold price is up 34%, even after the falls of the past couple of years – the inference must be that junior mining stocks are very much out of favour.
ARC is managed by Altus Capital. The individuals involved in managing the fund had not managed a fund before ARC was launched but they had plenty of experience as geologists, corporate financiers and managers of junior resource companies.
They called both the rally in the gold price and the likely duration of it, predicting in the prospectus that the gold price would rise for a couple of years.
Focus on developing companies
They also drew attention to the dearth of capital available in 2009 to finance the ambitions of the exploration companies and decided to focus on companies that had production or were in their development phase and had reasonable chance of attracting capital to finance their projects.
That stance has been relaxed a little since but only 17% of the fund was invested in exploration companies at the end of January 2014.
At the end of January there were 24 holdings in the portfolio. The top 10 accounted for just over half the fund – this is invested in precious metals companies, with the bulk of that in gold. But it also has exposure to uranium (4%), bulk minerals (around 16%), base metals (13%) and diamonds (over 6%) plus 6% in cash. There is quite a big exposure to Africa (over 40%).
One unusual feature is a holding in an open-ended fund run by the manager, which accounts for 7% of the portfolio. The manager rebates the underlying management fee on this investment.
The annual management fee is 0.85% on net assets with a minimum fee of £150,000 and Nimrod Capital, who launched the fund and acts as an adviser, also get 0.15% per annum.
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