Canadian Asset Managers Jumping Into Gold At An Astonishing Pace – State Street Global Advisors
(Kitco News) - Major Canadian asset managers are turning to gold at an unprecedented pace as an essential portfolio diversifier and hedge against growing market risk and volatility, according to an executive at State Street Global Advisors.
In a recent presentation in Montreal, Bobby Eng, head of SPRD ETF business development Canada said that his firm has seen Canadian investment demand grow by approximately $2 billion for SPDR Gold Shares, (NYSE: GLD), the world's largest gold-backed exchange traded product.
In an exclusive interview with Kitco News, Eng said that the end of 2016 Canadian investment in GLD represented about 7% or around $630 million of $9 billion invested in SPDR products. The most significant portion of Canadian investment dollars is in SPDR S&P 500 ETF (NYSE: SPY).
By the end of 2017 allocation in SPDR assets increased to about $17 billion with GLD allocations totaling around $2.7 billion, representing 16% of total SPDR assets, Eng said. Investment in the gold ETF increased more than 300% from the previous year.
"It's a pretty impressive growth rate," he said.
Eng's comments come as GLD, along with gold prices, struggle to find momentum as the U.S. dollar holds near a six-month high. GLD last traded at $122.51 a share.
While Eng won't have 2018 numbers until next year, he said that there are indications that demand for GLD has grown even more this year as volatility continue to increase.
"Canadian investors tend to be more conservative and a little bit more sophisticated. Institutional investors are looking at GLD as an important portfolio diversifier," he said. "Investors are looking for ways to dampen the rising volatility.
"I think we will continue to see further demand for gold as we see more headline risk in the marketplace," he said.
Last year, Canadian equity markets saw much higher volatility compared to unprecedented lows experienced in the U.S. Canadian equities also underperformed their U.S. counterparts with the S&P/TSX Composite Index increasing less than 5% in 2017, while the S&P 500 Index rose almost 19%.
Research from both the World Gold Council and State Street Global Advisors shows that a strategic investment in gold can maximize the gains in a portfolio while limiting its risk, said Eng.
While investor demand is expected to ebb and flow with market risk, Eng said that they are seeing a trend among asset managers to create a strategic allocation in the yellow metal, more so than it just being a tactical investment.
"Investors are starting the see the value of holding an allocation in gold for a better risk-adjusted return in their portfolio," he said. "It's an allocation to control the portfolio during times of risk. It's an insurance policy."