Aim: Growth by investing in smaller companies involved in the mining, exploration, development and production of gold, silver and other precious metals
Minimum investment: Lump sum £500
Investment split: At least 80% in smaller companies involved in the mining, exploration, development and production of gold, up to 20% in companies involved in the mining, exploration, development and production of silver and other precious metals
Isa link: Yes
Charges: initial 5.25%, annual 1.5%
Commission: Initial up to 3.25%, renewal 0.5%
Tel: 01296 414141
The SF T1ps smaller companies gold fund will invest at least 80 per cent in companies involved in the mining, exploration, development, and production of gold, with the remaining 20 per cent focusing on companies involved in silver and other precious metals. It is managed by Tom Winnifrith and Robert Sutherland Smith, who run the T1ps smaller companies fund. Winnifrith is a small cap share tipster who turned his hand to fund management in 2007, while Sutherland Smith has worked in the City for over 40 years.
Considering this fund’s suitability to the market, Michael Philips proprietor Michael Both says: “The performance of t1ps’ smaller companies growth fund in its first year of existence has been extremely impressive and no doubt investors will hope the same will happen to the t1ps gold fund. For the extremely adventurous, speculative investor this new fund could be worth a punt for a small portion of their portfolio.”
Both points out that widows and orphans are not likely to be comfortable with its risk profile. “The fund is one of a small number which have a very narrow focus on gold and precious metals but t1ps differentiates itself, at least initially, by a further concentration on the smallest companies in that universe. While gold and precious metals rise in price, this could magnify any returns quite spectacularly,” says Both. He feels that it could fit a particular, very speculative, niche. “Just make sure investors do not forget gearing works both ways,” says Both.
He observes that for similar reasons to a venture capital trust, the prospectus suggests a minimum investment period of five years. “Some of the unlisted shares may glister while others are likely to disappoint, despite an initial sparkle. As with nuggets buried in a gold mine, time is needed to extract value,” says Both.
Turning to the potential drawbacks of the fund Both says: “Starting with the blindingly obvious, this is a minuscule fund of small, predominantly gold-processing companies’ shares, A significant proportion of these may be either unlisted or extremely illiquid.”
Both adds that Tom Winnifrith is heavily involved with a website that focuses on exactly the type of shares this fund will be considering. “While we hope that everything possible will always be done to avoid conflicts of interest, as set out by the policy in the prospectus, and that the highest standards of probity will rule every aspect of the fund, there is clearly a huge potential for the type of influence that could be deemed inappropriate.”
Both thinks the initial IFA commission is high, which could be seen as good for advisers, but poor from an investor’s perspective.
Identifying funds which could provide the main competition for T1ps, Both highlights the £191m CF Ruffer Baker Steel gold fund and the £8m Smith & Williamson global gold & resources. “These funds have a very similar focus and have both been established for over five years. There are several other excellent funds which limit themselves to mining, such as the £1.75bn BlackRock gold and general fund.”
Given the significance of African and Russian companies as gold producers, Both finds it a little surprising that the prospectus does not explain why T1ps appears not to want to invest in these companies. “Perhaps it feels that these can be sufficiently, or more safely, accessed via listings on the exchanges it mentions,” he says.
Both points out that the fund has a very narrow remit for investments in what would be a speculative fund, even if it invested in bigger companies.
“Investors must bear in mind that while the net asset value of this fund may do extremely well on paper in a bull phase, when sentiment turns, as it will, the rush for the exit will be a very ungentlemanly stampede. This stampede could easily result in the fund’s suspension and long delays before assets can be realised at a fair price, if such can even be calculated.” He concludes that if the fund size remains small it is likely that the total expense ratio will stay high.
Suitability to market: Good
Investment strategy: Good