INVESTMENT EUROPE – GBI to launch gold structured product offering yield
By Jonathan Boyd
August 2, 2012
Gold Bullion International, which facilitates direct purchasing of physical gold, is to launch a structured product by the fourth quarter this year based on gold but which also offers yield to investors. The company believes that this type of product will help overcome one of the chief barriers to investors increasing their exposure to the asset in their core portfolios; namely that it historically is not know for its yield properties.
Chief executive Steven Feldman said research suggested many North American and European investors remain chronically under-invested in gold, and that for many an exposure of between 5%-10% should be the norm. Investors in the structured product would retain the right to convert to physical gold at any time, but in the meantime would be offered an as yet unspecified yield. That yield would be generated by a proprietary structure, Feldman said.
He said the product was not in the market currently, although distribution deals were being put in place that could see it delivered to both the US and key, liquid European markets for structured products. He did not specify which markets in Europe could be the target of initial distribution. However, he said that he was “very excited” by the product, which has been back tested against more than a quarter of a century of data.
GBI also intends to launch a new gold index for investors by the end of the third quarter or early in the fourth quarter.
The intention is to provide a measurement that can overcome arguments about the intrinsic value – or lack of – in gold.
There have been a number of historical measurements available in the market to provide a relative benchmark of gold’s value, such as the price of gold against oil or against the Dow Jones Industrial Average index.
GBI has done further research into the area, and come up with an index that can provide a view of the value of the metal on a relative basis against some dozen other factors. It is likely to be a GBI branded index when launched.
GBI developed its services originally for its home US market, to facilitate access to physical gold by the mass affluent. It has developed technology that enables wealth managers to push through trades in the same way as buying equity or fixed income assets. Clients’ orders are turned into physical holdings in gold, which may be stored anywhere in a number of locations across North America, Europe or Asia.
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