SOURCE: The Telegraph--Calcutta, India
June 11, 2007
Fund offers to bet on gold mining outfits
ANIRUDH LASKAR
Mumbai, June 10: DSP Merrill Lynch is launching a fund this week that will invest in shares of gold mining companies across the world.
Though a first in India, the fund has been launched in other countries and has assets of $5.8 billion as on March 31.
Merrill Lynch International Investment Fund — World Gold Fund will be benchmarked against FTSE Gold Mines Index and give returns in dollars.
Aniruddha Naha, the fund manager in India, said the scheme would expand the foreign investment options of individuals.
About 80 per cent of the money will be invested in gold companies; and the rest will be in other minerals.
The fund has invested 12 per cent of its corpus in platinum companies and 4 per cent in silver.
Dhirendra Kumar, CEO of Valueresearchonline, said the fund was a good investment option but there was a risk the returns getting eroded by the appreciation of the rupee.
Nath said the currency risk was an issue. “We would be including all the risk factors in our offer documents, once the fund is launched next week. We have sufficient expertise to hedge against the underlying risks attached to MLIIF World Gold.”
He, however, did not divulge the load structures on the fund.
The earnings will be a combination of the returns from investments and gains or losses from movements in exchange rates.
If the rupee fails to check its rise against the dollar, the extent of appreciation will reduce the yield on the fund. If it appreciates in excess of the returns from the investment, there will be losses.
Investments have been made in Barrick Gold Corporation — the exposure is 8.3 per cent of the corpus, Impala Platinum Holdings Limited, 7.5 per cent, Gold Fields Limited, 7.2 per cent, and Kinross Gold Corporation, where the exposure is about 6 per cent.
The largest portion has been invested in North America, about 31 per cent of the corpus. This is followed by Australia, 22 per cent, and South Africa 19.9 per cent.
Sources said such funds displayed high volatility.
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COMMENTARY:
I don't get it. This article was highlighted on JES this evening, and JES himself wrote that this fund will do "very well."
If mining shares are basically toilet paper due to non-recourse loans....
and
if US dollar is headed for the crapper imminently thus forcing
higher the rupee...
how is this particular fund supposed to be a "do very well" investment vehicle in the upcoming gold rally?
Any theories
G_T |
