If you thought that Evy Hambro, manager of the BGF World Mining Fund, the BGF World Gold Fund, and now also manager of the BlackRock World Mining Trust and the popular BlackRock Gold & General Fund, has too much on his plate, think again.
"If all the funds where in different sectors and had different investment processes then yes maybe it would be a lot to handle. But all the funds are similar in terms of sector focus and holdings," says Mr Hambro, who took over the reigns of the BlackRock Gold & General Fund from Graham Birch in April following the announcement that Mr Birch was taking a nine month sabbatical.
While the timing of Mr Birch's leave might have caught some off guard, the selection of Mr Hambro to fill his shoes did not. "We did not get a single investor calling us up expressing concern over the decision," says Mr Hambro, adding that he has been quite "flattered" by the vote of confidence in his abilities.
But, given his experience in gold equities, it should hardly be surprising that the 30-something year old was concerned a safe pair of hands to manage the most successful unit trust in the UK.
A bit of a 'gold junkie' in his own right, Mr Hambro's interest in the yellow metal was sparked after a summer internship with Mercury Asset Management's natural resources team in 1993.
"That summer of 1993 was one of the great gold bull markets started by Jimmy Goldsmith and George Soros. The gold price surged by $100 per ounce in a few weeks - it was a very, very exciting and intoxicating time to be involved and I got addicted to it. "
Since then Mr Hambro's love affair with gold has not waned, and he believes the argument for holding gold is as strong now as it has ever been.
"Gold has a role to play in everybody's portfolio - it is a wonderful diversifier of one's asset base. Also, the mining industry's assets are still in the ground, so when you buy into gold mining companies you are backing real hard assets rather than a brand or a widget manufacturer."
He adds that given the current competitive debasement of currencies, there is a comfort in knowing that you can not print gold bars.
While some might argue that gold is not an investment because it does not yield an income, Mr Hambro begs to differ. "Gold does have a yield. If you hide your bank notes under your mattress, there will be no yield but if you put it in deposit with the bank , you will get a yield. Similarly, if you put your gold under your mattress it is not going to give you a yield, but if you put your gold on deposit with the bank and allow them to lend your gold out, then you will get an interest rate paid back to you. The borrowing cost of gold today is about one per cent per annum, while the interest you get paid on cash in your bank account is less than half a per cent. So, if you are prepared to lend your gold out, it is actually yielding more than cash."
| Evy Hambro CV |
|---|
| Evy Hambro is a member of BlackRock's Natural Resources Equity team. He is responsible for the management of several gold and mining portfolios. Mr. Hambro's service with the firm dates back to 1994, including his years with Merrill Lynch Investment Managers (MLIM), which merged with BlackRock in 2006. Mr. Hambro has a BSc degree, with honours, in marketing, from Newcastle University. He is the son of Peter Hambro, founder of Peter Hambro Mining. |
Yield or no yield, if there is any testament to the robustness of gold as an investment, then it is the BlackRock Gold & General Fund itself. The Fund, which invests in gold mining and other precious metal related shares, has been the best performing unit trust in the UK since its inception more than 20 years ago. Investors who put £1000 into the fund in April 1989, would have had an investment worth £16,684 by April this year.
Mr Hambro believes the success of the fund, which was launched back in 1988, has in part been due to its consistent investment process. "We have always tried to buy into interesting stories which we think will do well over periods of time – we do not try and chase short term returns in what can be a very volatile sector.
"As managers we look for companies with strong production growth, which are healthy cash flow generators, pay good dividends and are likely to discover more gold in the ground."
He adds: "The gold mining industry has always been filled with rogues – people with treasure maps who lean towards over promotion - you have to be very careful when investing in mining companies. Our job is to avoid the traps through mitigating risk and creating a diversified portfolio approach for the long term."
Mr Hambro believes it is in the demand and supply drivers, which will drive up the gold price over the long term. "Gold production has been declining almost every year since peaking back in 2001, with no real growth prospects in the pipeline to turn the trend around. Central Banks have also been selling sufficiently less quantities of gold – in fact in the year to date they have become net buyers of gold."
"On the demand side, while the gold jewellery demand has fallen, the growth in gold for investment purposes has been rapid with the launch of gold exchange-traded funds (ETFs). These drivers are all very supportive for the price."
While the Blackrock Gold & General Fund will periodically use ETF Securities' ETFS Physical Gold product when gold shares are expensive relative to the price of gold, or as an alternative to cash, Mr Hambro does not see the proliferation of ETFs as a threat to the BlackRock Gold and General fund. He says: "There is an investment case for both an actively managed gold fund and a gold ETF however over time the BlackRock fund has managed to outperform the gold price."
Despite the so-called 'modern day gold rush' with investors rushing to get an investment toehold in the precious metal, Mr Hambro believes that prices are being driven more by supply and demand factors than by "hot money coming in to buy gold". He says: "Ultimately, the most supportive factor for the gold market is the fact that production is continuing to fall."
