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When It’s Time to Get into Gold – Hedgefund.net

By Paula Schaap, Senior Reporter
July 9, 2010

A new venture is making it easier for hedge fund managers who want to invest directly in gold.

Gold Bullion International (GBI) said last week that it was launching a new product that will allow investment managers to own the actual physical precious metal.

Some prominent hedge fund managers, such as John Paulson and George Soros, have turned to gold investments as a hedge against inflation. But usually the investment is in mining companies or in ETFs like SPDR Gold Shares.

“Even though demand for physical gold ownership has exploded, there has not been an efficient or cost-effective method to meet that demand,” said GBI Chief Executive Officer Colbert Narcisse.

GBI, however, is bringing investment in the actual raw material as an additional option for managers.

The chief impediments for investors looking to get into the physical market are ease of execution as well as pricing, Narcisse told HedgeFund.net.

“It’s a fairly opaque market,” he said.

For pricing purposes, GBI has a network of eight precious metal dealers who are all members of the London Bullion Market Association.

GBI Chief Operating Officer Savneet Singh says efficiency is what GBI also can bring to hedge funds and other asset managers who want to invest directly.

If a hedge fund, for example, wants to order $1 million in gold and have it stored in Zurich, GBI bids it out to several dealers in the Swiss city, Singh said.

“Within 20 minutes of the trade, the hedge fund will have a confirmation,” he said.

Besides gold, GBI can offer investors silver, platinum and palladium.

The firm’s advisory board includes retired General Wesley Clark, former House majority leader Richard Gephardt, Tocqueville Gold Fund Portfolio Manager John Hathaway and former SEC Chairman Arthur Levitt.

Before starting up GBI, Narcisse was with Merrill Lynch for 17 years, most notably as COO for Investment Banking, Americas.

Cofounder Singh was most recently an investment analyst with Chilton Investment Co. where he covered investments in the technology, alternative energy and infrastructure space.

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