PRECIOUS METALS,DIAMONDS & GEMSTONESINVESTMENT SUMMIT         Investing in gold equities         Tim Weir – Investment Dir...
WESSEX              GOLD FUND   Who are we - Wessex Asset Management                     Pages 3-5   What are the characte...
Wessex Asset Management                                           10+ year hedge fund track record co-managing the        ...
Wessex Asset Management                                       10+ year Asian Hedge Fund track record co-                  ...
The Gold bull market in US dollars             The gold bull market is not driven just by US$ weakness…                   ...
Gold Price in Major Currencies        … There is an ongoing gold bull market even in strong currenciesSource: Bloomberg   ...
Gold is still in a bull market                        Strong gold supply / demand fundamentals                        1.  ...
Gold market s – the new geography                      North America: Valuation premium                          Russia & ...
Defining a profitable niche 1                  Sustainable excess returns can be generated by a L/S gold equity           ...
Defining a profitable niche 2                      A long/short gold equity fund offers differentiated value –            ...
Investment Philosophy                      Resource markets            Ideas before numbers – correlations are unstable   ...
WGF trade examples: AUSGOLD           A new gold province in Western Australia?March 11                                   ...
WGF trade examples: PETRA DIAMONDS  Ex-De Beers management cutting costs and innovating in diamonds in southern AfricaMarc...
WNRF Trade examples 1:                                                                3                                   ...
Risk Parameters 250%                                                                                                      ...
Summary           We can make very significant money in the continuing gold bull           market.           Good stock pi...
WGF performance versus gold bullion and gold shares              WGF Outperformed Gold Shares Index by 12% in 2010        ...
WESSEX GOLD FUND   ‘A’                        J             F               M             A              M               J...
Wessex Asset Management                            Peter Chesterfield   Chairman and Investment Director                  ...
Fund Service Providers                          Investment Manager         Wessex Asset Management Ltd.                   ...
Fund Overview                           Minimum Investment       500,000 USD                                   Subscriptio...
Abbey Commodity & Energy Trust Limited (ACET)                                     Offer to Offer Price Basis (Net Income R...
DISCLAIMER           Important Notice:           The Wessex Gold Fund THEORETICAL (WGFT) should be viewed solely as a calc...
LONDON OFFICE                                 BOURNEMOUTH OFFICE                       Douglas SloaneTel: 44 (0) 207 059 2...
Investing in gold equities
Investing in gold equities
Upcoming SlideShare
Loading in …5
×

Investing in gold equities

1,297 views

Published on

Objective Capital's Precious Metals, Diamonds & Gemstones
Investment Summit 2011
Ironmongers' Hall, City of London
6 April 2011
Speaker: Tim Weir, Wessex Asset Management

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,297
On SlideShare
0
From Embeds
0
Number of Embeds
247
Actions
Shares
0
Downloads
12
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Investing in gold equities

  1. 1. PRECIOUS METALS,DIAMONDS & GEMSTONESINVESTMENT SUMMIT Investing in gold equities Tim Weir – Investment Director, Wessex Asset ManagementIRONMONGERS’ HALL, CITY OF LONDON ● WEDNESDAY, 6 APR 2011www.ObjectiveCapitalConferences.com
  2. 2. WESSEX GOLD FUND Who are we - Wessex Asset Management Pages 3-5 What are the characteristics of the gold market(s) Pages 6-11 and how can we make money for our investors? Stock picking in gold equities Pages 12-14 Does it work? Appendices and disclaimer Pages 15-24March 11 2
  3. 3. Wessex Asset Management 10+ year hedge fund track record co-managing the Wessex Asia Pacific Fund (WAPF). Tim Weir Wessex Natural Resources Fund manager since 2004 launch. Chief Executive, Investment Director Wessex Gold Fund manager since 2007 launch Economist by training Fund Manager: MA Oxford PPE 1980 Wessex Gold Fund Wessex Natural Resources Fund AIIMR since 1982 Set up Abbey Commodity and Energy Trust 1982 Head of equities, Swiss Bank Corporation institutional funds London 1988-1993 Managed SBC’s GoldPortfolio, one of the world’s biggest gold equity funds, which won the Bopp-Finanz Swiss mutual fund prize 1990-93 Director of European equities at Nat West Investment Management 1993-1996March 11 4
  4. 4. Wessex Asset Management 10+ year Asian Hedge Fund track record co- managing the Wessex Asia Pacific Fund (WAPF) Peter Chesterfield Co-manager Wessex Natural Resource and Gold Chairman, funds Investment Director MSc (Honours) Mining Geology Exploration Geologist, Project Geologist, Investment Analyst in ANZ 1979-82 Mining analyst at Prudential in London 1982-84 Managed Abbey’s Commodity and Energy trust (ACET) and resource portfolios (see appendices). 14 year Asian track record managing Abbey Life’s Asian Pacific Trust (AAPT) 1985-99. Responsibility for over $1 billion of assets at Abbey LifeMarch 11 5
  5. 5. The Gold bull market in US dollars The gold bull market is not driven just by US$ weakness… USDMarch 11 6
  6. 6. Gold Price in Major Currencies … There is an ongoing gold bull market even in strong currenciesSource: Bloomberg EURO not driven just be US$ weakness AUDMarch 11 7
  7. 7. Gold is still in a bull market Strong gold supply / demand fundamentals 1. Real interest rates are still very low or negative 2. Strong consumer demand, increasingly from newly affluent Asians 3. Asian central bank buying – Iran the latest to diversify reserves 4. Perceived as a safe haven in times of financial instability 5. Increased investment demand assisted by launch of ETFs 6. Falling gold mine production (notably South Africa) Cross-currents 1. Gold normally benefits from US$ weakness and rate cuts 2. Gold as each-way bet on inflation and deflation risks 3. Can lose out tactically on FX moves and liquidity drying-up 4. End of QE, high interest rates and end of inflation fears would signal end of gold bull market Equities 1. Equities have ‘optionality’ and are currently cheap relative to bullionMarch 11 8
  8. 8. Gold market s – the new geography North America: Valuation premium Russia & FSU: Some opportunities but justified by lower political risk. major expropriation risk. Some production expansion from China: World’s biggest producer, but reviving older mines. companies are fairly opaque. South America: Some interesting assets, mostly owned by North American majors. South Africa: Increasing depth, power supply issues Australia: Most pure Oz gold and falling grades make cost control very difficult. plays are small (except Politics a worry. Newcrest). Oz-listed stocks West Africa: The new frontier. Exciting growth eg producing from Asia, Africa. Tasiast mega-mine. Politics has improved significantly.March 11 9
  9. 9. Defining a profitable niche 1 Sustainable excess returns can be generated by a L/S gold equity fund because of persistent characteristics in the gold market Gold is in a long-term bull market, but one characterized by high volatility and enormous stock divergence – how to profit from this? Gold equities have leverage to bullion through operating gearing and enhancing the value of reserves in the ground Commodity equities have accessible stock alpha due to the generally poor quality of research. Analysts tend to be relatively inexperienced. Good stock pickers should be able to beat a gold equity index or ETF. Wessex principals have been meeting mine managers, going underground and analyzing gold mines since early 1980s. No special magic, just hard work and knowledge which cannot be replicated in front of Bloomberg screensMarch 11 10
  10. 10. Defining a profitable niche 2 A long/short gold equity fund offers differentiated value – not replicated by CTAs, long-only funds or holding physical gold A good stock picker can add more value in a long/short fund than in a long-only vehicle – the gross can be higher, the net can be higher or lower, shorts can be used for alpha or for protection Gold shares should do better than bullion in a bull market CTAs are better placed for protecting downside and making money in bear markets, but will normally not give full exposure in a bull market Value can be added by timely exposure to silver, diamonds and PGM equitiesMarch 11 11
  11. 11. Investment Philosophy Resource markets Ideas before numbers – correlations are unstable (no mechanistic data mining ) Stereoscopic investment Dynamic equilibrium between bottom-up and top- down Diversification By strategy and theme, reduces risk and volatility. More arbitrage when unclear on directional bets Style chameleon Value, growth and momentum at appropriate times Risk Take only the risk we want, understand and can turn into value Technical analysis/charts Used to assist in timingMarch 11 12
  12. 12. WGF trade examples: AUSGOLD A new gold province in Western Australia?March 11 13
  13. 13. WGF trade examples: PETRA DIAMONDS Ex-De Beers management cutting costs and innovating in diamonds in southern AfricaMarch 11 14
  14. 14. WNRF Trade examples 1: 3 Uncertainty over reserve replacement and company cash balance Short trade – Sons of Gwalia 2 5 . (Gold, Australia): 2 Stock trading on a very high valuation despite 0 09 0 / 6 2 / 0 0 4 our concerns that the balance sheet remained 2 - 0 1 5 . BUY stretched. 4 - -37 0 SELL The hedge book was 1 Cumulative (1000s progressively getting Shares) Delisted further into the red, 6 - 0 while reserves were not -67 05 . -65 being replaced. 8 - 0 -86 RESULT: company 1 - 0 0 0 announced profit- -100 Crossed with Morgan Stnley after delisting, warning in July 2004 and short covered at 0.01 entered administration in 1 - 2 0 August.March 11 Source: Bloomberg,WAM 15
  15. 15. Risk Parameters 250% 15% WNRF Market Cap of Precious Exposures WGFT Long / Short Exposure History Snapshot 200% 150% 100% 5% 50% 0% Source, Definition : WAM 31st May 2006 -50% -5% May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Large <5bn Mid<1bn Small<300 CommodityWGFT = Wessex Gold Fund THEORETICAL = using actual precious metal sector weightings of the Wessex Natural Resource Fund (WNRF) May 2004 to July 2007 andscaling the weightings up such that the average net position over the life of the WGFT would have been 100% net in these sectors. Average precious metal sector weight inWNRF to date has been 23% and therefore the attribution has been scaled up by a constant factor of 1/23%. Source:WAMMarch 11 16
  16. 16. Summary We can make very significant money in the continuing gold bull market. Good stock picking and market timing can turn this into a longer-term profitable hedge fund opportunity Wessex team has a strong fund track record and portfolio managers who are very experienced in gold markets A dedicated L/S gold fund, run more aggressively in terms of the net and stock concentration can achieve very strong returnsMarch 11 17
  17. 17. WGF performance versus gold bullion and gold shares WGF Outperformed Gold Shares Index by 12% in 2010 250 200 150 100 50 - AMEX GOLD BUGS INDEX (^HUI) Wessex Gold Fund (WGF) Gold Bullion 2007 2008 2009 2010 2011 WGF 3.7% -27.5% 35.5% 45.3% -6.8% HUI 4.2% -26.1% 42.2% 33.4% -1.6%March 11 18
  18. 18. WESSEX GOLD FUND ‘A’ J F M A M J J A S O N D YTD 2007 5.9% -4.8% 3.1% 3.7% 2008 5.2% 10.3% -9.6% -11.1% 9.6% 2.1% -8.5% -12.8% -5.8% -39.5% 27.2% 20.5% -27.5% 2009 -3.0% 0.3% 9.2% -3.1% 16.2% -8.7% 1.5% 1.5% 10.5% -5.2% 18.3% -2.9% 35.5% 2010 -7.5% 4.1% 0.9% 5.2% -2.5% 2.7% -1.8% 6.0% 13.0% 4.9% 1.2% 13.7% 45.3% 2011 -9.2% 2.6% -6.8%Reported performance is net of fees. Performance numbers shown are records of past performance and as such do not guarantee or provide a guide to future performance.
  19. 19. Wessex Asset Management Peter Chesterfield Chairman and Investment Director Tim Weir CEO and Investment Director Gabrielle Knights Fund Manager Anna Donald Fund Manager Brendan Long Consultant, hydrocarbons Sarah Martin Associate Director, Operations Nicola Dady Middle Office Executive Douglas Sloane Marketing Director George Vere-Laurie Consultant, risk and business development Mishcon De Reya WAM Legal Counsel Throgmorton WAM Accounting IMS Consulting Compliance Consultants Treken Technology SupportMarch 11 2020
  20. 20. Fund Service Providers Investment Manager Wessex Asset Management Ltd. 8 Queen Street London WIJ 5PD Prime Broker / Custodian Morgan Stanley 25 Cabot Square, Canary Wharf London E14 4QA Auditor Ernst & Young Harcourt Centre, Harcourt Street Dublin 2, Ireland Administrator BNY Mellon Alternative Investment Services Unit D1, Balmoral Estate, Kells Road Navan, Co. Meath, Ireland Legal Counsel Mishcon De Reya Summit House, 12 Red Lion Square London, WC!R 4QD Legal Counsel (offshore) Maples and Calder PO Box 309, Georgetown Cayman IslandsMarch 11 21
  21. 21. Fund Overview Minimum Investment 500,000 USD Subscriptions Monthly Redemptions Monthly 30 calendar day notice Management Fee 1.5% Share Class A, 1% Share Class B Incentive Fee 20% Share Class A 15% Share Class B Other Fees None High Water Mark Yes Lockup None Share Class A ,12 months Share Class B Early Redemption Fee None Benchmark HUI Gold Bugs Index, XAU Gold and Silver Index in US$ Volatility Benchmark HUI Gold Bugs Index Strategy Long/Short Gold and Precious Metals Equities Region Global Domicile Cayman Islands Listing Irish Stock Exchange Target Return 25% compounded per annum Target Volatility noneMarch 11 22
  22. 22. Abbey Commodity & Energy Trust Limited (ACET) Offer to Offer Price Basis (Net Income Reinvested) Current Valueof £100 Invested over various periods to 1st October 1987 Fund 12 Months 36 Months 60 Months 84 Months 120 Months FT GOLD MINES 142.0 80.7 127.5 89.7 310.1 FTA OILS 175.7 227.7 420.0 375.7 669.2 PLND SVNGS COMMY & ENERGY 184.6 178.9 267.7 205.6 495.2 ABBEY COMMODITY & ENERGY 233.7 1 272.0 2 409.7 1 ALLIED DUNBAR MET MIN COM 178.1 17 169.5 17 248.7 11 237.0 3 481.4 6 ACET in Planned BG ENERGY COUNTY ENERGY 167.8 135.2 23 28 268.0 122.5 3 24 176.4 16 EFM RESOURCES 162.4 25 148.8 20 Savings Magazine F&C NATURAL RESOURCES GARTMORE COMMODITY 195.8 177.5 10 18 179.4 183.2 13 12 305.6 4 232.6 4 616.7 3 GARTMORE GOLD SHARE 197.2 9 176.5 16 GARTMORE OIL & ENERGY 168.7 21 159.6 19 251.5 10 GOVERTT GOLD & MINERALS 227.3 2 206.8 6 Managed by Tim Weir and HENDERSON GLOBAL RESCRCS 201.7 7 193.0 8 275.3 8 242.4 2 676.6 1 HENDERSON GOLD 203.9 5 Peter Chesterfield HILL SAMUEL NATURL RESRCS 198.5 8 210.3 5 300.6 5 LEGAL & GENERAL NAT RESOR 201.9 6 Ranked 1st for 12mths LLOYDS BK ENERGY INTERNTL 141.9 27 143.6 22 213.2 15 Ranked 2nd for 36mths M&G COMMODITY & GENERAL 189.6 13 184.6 11 324.4 3 270.4 1 638.8 2 M&G GOLD & GENERAL 183.7 16 191.0 9 Ranked 1st for 60mths MIDLAND BK COMMODITY MIM BRIT COMMODITY SHARE 171.4 167.8 20 22 177.3 178.7 15 14 262.9 247.9 9 12 188.9 160.7 7 9 468.5 401.1 7 8 MIM BRIT GOLD 186.0 15 239.6 4 WIM BRIT UNIVERSAL ENERGY 149.2 26 92.1 25 146.8 17 84.5 10 223.5 10 NM SCHRODER GOLD 204.3 4 197.0 7 S&P COMMODITY SHARE 186.2 14 190.5 10 277.8 6 220.8 6 528.4 4 S&P ENERGY INDUSTRIES 164.1 24 141.9 23 220.0 14 162.3 8 389.4 9 S&P EXPLORATION 217.5 3 293.1 1 400.0 2 TARGET COMMODITY 189.7 12 146.5 21 239.5 13 224.3 5 516.2 5 TARGET GOLD 174.7 19 165.7 18 275.6 7 TSB NATURAL RESOURCES 192.9 11 28 FUNDS 25 FUNDS 17 FUNDS 10 FUNDS 10 FUNDS TRUST AVERAGE 184.6 185.2 269.2 202.4 494.1 Source: Planned Savings Magazine UKMarch 11 23
  23. 23. DISCLAIMER Important Notice: The Wessex Gold Fund THEORETICAL (WGFT) should be viewed solely as a calculation of the precious metal sector performance of the Wessex Natural Resource Fund (WNRF) whilst as a variable part of the WNRF portfolio. The actual performance of the proposed Wessex Gold Fund could and probably will have different characteristics. These differences include but are not limited to regional, concentration, gross and fund focus. This document is intended solely for publication and distribution to the recipient and may not be passed on or disclosed to any other person. This document is for information only and is not an offer to sell or an invitation to buy shares in the Wessex Gold Fund. In particular, it does not constitute an offer or solicitation in any jurisdiction where it is unlawful or where the person making the offer or solicitation is not qualified to do so or the recipient may not lawfully receive any such offer or solicitation. It is the responsibility of any person in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of relevant jurisdictions.The information and any opinions contained herein have been obtained from or are based on sources which are believed to be reliable, but the accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss from this information. Prospective investors should review the prospectus for the WGF before making an investment decision and should rely only on the information contained in the prospectus. Prospective investors should also inform themselves, and should take appropriate advice, on the legal requirements and as to the possible tax consequences, foreign exchange restrictions or exchange control requirements that they may encounter under the laws of the countries of their citizenship, residence or domicile and that may be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments. The value of investments and income derived therefrom can decrease as well as increase (this may be partly due to exchange rate fluctuations in investments that have an exposure to currencies other than the base currency of the Fund). Performance numbers shown are records of past performance and as such do not guarantee future performance. Regulated in the United Kingdom by FSA. This document is issued by Wessex Asset Management Limited. The Wessex Gold Fund (the ‘fund’) is defined as an Unregulated Collective Investment Scheme’ (‘UCIS’) and the promotion of a UCIS either within the UK or from the UK is severely restricted by statute. Consequently, this document is only made available to Professional Clients and Eligible Counterparties as defined by the FSA and to persons falling within the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001. Shares in the fund should only be purchased by persons with professional experience of participating in unregulated schemes and any other person who receives this document should not rely upon it.March 11 24
  24. 24. LONDON OFFICE BOURNEMOUTH OFFICE Douglas SloaneTel: 44 (0) 207 059 2895 Tel: 44 (0) 1 202 200 930 Director of MarketingFax: 44 (0) 207 059 2901 Fax: 44 (0) 1 202 200 931 douglassloane@wessexam.co.uk8 Queen Street Lorne Park House, Lorne Park Road 44 (0) 207 659 2893London WIJ 5PD Bournemouth BH1 1JJ www.wessexam.co.uk Authorized and regulated by the FSA and registered with the SEC

×