We have not previously dedicated coverage to a Precious Metals based ETF from Merk Funds, currently their only ETF offering, OUNZ (Merk Funds Gold Trust, Expense Ratio 0.40%).
Merk Funds motto is “The Authority On Currencies” if you browse their company website, and the company has been primarily known for their mutual fund offerings such as MABFX (Merk Absolute Return Currency Fund, Expense Ratio 1.30%), MEAFX (Merk Asian Currency Inv, Expense Ratio 1.30%), and MERKX (Merk Hard Currency Fund, Expense Ratio 1.30) for instance, so OUNZ is their first foray into the ETF business.
OUNZ debuted in May of this year, and has notably attracted about $56 million in assets since inception, and given the level of competition in the Gold ETF space, this is admirable in such a short time period. Of course there are some giants in the Gold ETP space, notably with GLD (SPDR Gold Trust, Expense Ratio 0.40%) commanding $26.9 billion in assets under management in spite of net outflows in 2014 of more than $2.7 billion and amid a painful path of falling Gold and Precious Metals prices largely throughout the year.
IAU (iShares Gold, Expense Ratio 0.25%) would come in second, with just shy of $6 billion in AUM, and we note a lower level of outflows year to date in this fund, with “only” about $95 million leaving via redemptions. There is quite a drop-off after these two funds in terms of where the assets are across other gold products, for instance the next largest fund SGOL (ETFS Physical Swiss Gold Shares, Expense Ratio 0.39%) has $962 million in AUM and then DGL (PowerShares DB Gold Fund, Expense Ratio 0.79%) the next in line only has $138 million in AUM at the moment.
OUNZ is categorized as “Physically-Backed” and according to fund literature “provides investors with a convenient and cost-efficient way to buy and hold gold through and exchange traded product with the option to
take physical delivery of gold.” Secondarily, fund literature states “provide investors with an opportunity to invest in gold through the shares and be able to take delivery of physical gold bullion (physical gold) in exchange for their shares.”
The gold bullion is purported to be held in London Bars, and the optionality for the investor to take physical delivery of gold bullion in exchange for ETF shares that they own, is certainly and interesting, and perhaps understated distinction here which makes this fund unique. Furthermore, fund literature also notes that “taking delivery of gold is not a taxable event as investors merely take possession of what they already own: the gold.”
Given a backdrop of falling Gold prices for most of this year, we will likely continue to see action in any and all Gold related ETPs for the foreseeable future and perhaps re-allocations from one fund to another where it makes sense given an individual’s circumstances.
We imagine that barring registration and/or regulatory setbacks, OUNZ will not be the last Merk Funds listed ETF in the U.S. marketplace as we have read snippets in the past regarding a possible Hard Currency ETF among other potential future launches.
Merk Gold Trust
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