Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Gold equity funds have posted a baneful performance for the past year despite firm gold prices and rich returns from gold ETF’s.
According to the Economic Times two of the key gold equity funds, the DSP Blackrock World Gold Fund and the AIG World Gold Fund, have posted negative returns of 11.5% and 16.5% respectively for the past year.
The dismal performance of these funds arrives just as gold’s performance is flourishing in other areas. Gold prices have gained 27% over the past year while gold exchange traded funds (ETF’s) have posted average returns of 26% for the same period.
The past year’s poor performance is in stark contrast to 2009, when gold equity funds rose nearly two times compared to the net asset value of gold ETF’s.
Analysts impute the poor showing of the equity funds to investors selling liquid stocks to prop up beleaguered portfolios and heightened risk aversion to equities.
Both DSP Blackrock World Gold Fund and AIG World Gold Fund serve as feeders for investment into gold mining companies such as Randgold Resources, El Dorado Gold Corp, Yamaha Gold Inc., Newcrest Mining and Franco-Nevada Corp.
ETF’s remain the preferred investment vehicle for those who seek returns which are directly correlated with physical gold prices. Physical gold prices often have no bearing on the performance of gold equity funds however, which are considered normal equity schemes for investors with a long-term outlook.
