In late 2010, ETF Securities debuted a new kind of precious metals fund, one that applied the popular physically-backed exposure to all four of the coveted commodities. Below, we take a deeper look at the Physical Precious Metal Basket Shares ETF (GLTR ) and what investors need to know prior to taking a position.
Inside GLTR's Strategy
Physical exposure has been a popular theme in the ETF world, as many investors have expressed interest in owning physical precious metals rather than futures contracts. GLTR is the first and only fund to apply that exposure to all four precious metals: gold, silver, platinum, and palladium.
The fund holds all four commodities in vaults in London and Zurich, an important point for some investors. In the precious metals world, a number of investors like to see vaults outside of the U.S. as some investors fear the possibility of a gold confiscation or similar tactic reappearing in the U.S. The ETF holds physical bars of the precious metals and lists the count (in ounces) of each on its website each day.
The vaults are inspected by Inspectorate International on a semi-annual basis.
Considerations on GLTR's Performance
Though GLTR invests in all four precious metals, its performance is dominated by what happens to gold and silver. The fund’s portfolio allocation breaks down as follows: gold (57%), silver (27.8%), platinum (7.7%), palladium (7.6%). Something of a disappointment, the fund grants far too much weight to gold and silver while leaving the remaining two precious metals with hardly any say in the fund’s outcome.
This is a shining example of a lesson ETF investors need to learn; never judge an ETF by its name. Going by its name alone, GLTR seems like it would have a decent balance between all four precious metals and its performance would reflect that, but the fund is very heavy in just two metals, something an investor would never see if they did not take a look at its fact sheet. Over the trailing five years, palladium has been, by far, the best performing precious metal; GLTR’s top-heavy portfolio has muted these gains for its investors with such a low allocation.
How to Use GLTR in a Portfolio
GLTR should never be thought of as a core holding in a portfolio, but rather a complement to an already diversified strategy. The fund stands out in its offering of physically-backed precious metal exposure, but falls short in the diversity category. If you are an investor looking for exposure to both physical gold and silver, GLTR is a good option, but those looking for a nice balance in the entire precious metals field may want to look elsewhere.
The Bottom Line
GLTR gives investors a fresh look at the precious metals world with an exposure not offered elsewhere in the ETF world. Investors should take a close look under the hood to make sure that its allocation and strategy are right for them prior to taking any kind of position.
Follow me on Twitter @JaredCummans.
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Disclosure: No positions at time of writing.