Darwin Investment Manager’s David Jane has been looking to assets other than gold to act as a diversifier while offering some downside protection.
The Darwin Multi-Asset fund manager currently has 1 per cent of his portfolio in gold although he is sceptical the yellow metal will be unable to get over the negative momentum that has pushed it down 25 per cent over the first 11 months of 2013.
While conceding gold is an “excellent, very liquid, diversifier”, Jane says he prefers to use assets that have less volatile profiles and a stronger chance of generating investment returns.
He says: “Even though we struggle to find diversifiers in such correlated markets, as we have mentioned many times before, we feel more comfortable with diversifiers other than gold. For example, equities that are uncorrelated, shorter dated government bonds and property.”
But Jane says he can foresee “extended periods” when gold will play a more significant role in his portfolio, such as when the US Federal Reserve starts to taper its $85bn-a-month quantitative easing programme.
Hargreaves Lansdown investment analyst Richard Troue says: “If stockmarkets continue their liquidity-driven rally and investors remain in ‘risk-on’ mode, gold might prove an unexciting investment. But in theory the longer QE goes on the more likely we are to see higher inflation down the line which could ultimately be positive for gold.”