Exchange traded funds have helped investors gain exposure to gold markets and various other segments related to the precious metal.
“You can also focus on the miners, which is where U.S. Global focuses on our ETF right now. U.S. Global; we’ve had a long history of investing in this space. We’ve actually had the no-load mutual fund over thirty years ago, so it only made sense for us to create an ETF in the mining industry,” Michael Matousek, Head Trader, U.S. Global Investors, said at the Inside ETFs conference.
Specifically, as a way to differentiate itself from other strategies out there, the U.S. Global gold miners ETF includes a targeted tilt toward royalty and streaming companies, which many consider to be the “smart money” of the space. The U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEArca: GOAU) is a smart beta offering that tracks a specialized or rules-based index to help hone in on quality players in the gold mining space. The underlying U.S. Global GO GOLD and Precious Metal Miners Index uses quantitative analysis designed to capture the performance of companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means.
The ETF includes a 30% tilt to royalty and streaming companies, which could help investors better manage common risks associated with traditional producers, such as building and maintaining mines, among others. The lower risk may also diminish risk since royalty companies have historically rewarded investors by increasing dividends at a faster pace than the broader equity market.
According to U.S. Global, royalty companies are a superior way to target the gold mining segment. Royalty companies are not responsible for costly infrastructure, so huge operating expenses can be avoided. These companies hold highly diversified portfolios of mines and other assets to mitigate concentration. Additionally, they generate some of the highest revenue per employee of all public companies while growing cash flows and dividends.
Watch What Michael Matousek Had To Say About Gold Market Exposure:
For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.