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“There is absolutely no use for gold today. When you think about the world without gold, nothing would happen, but a world without copper or alloy or zinc is not running anymore. That is a huge difference,” Wildmann said.
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In Fear of ‘Worthless’ Paper, Rich Buy Hard Commodities
February 14, 2010
Geneva. The ultra-rich are increasingly buying copper, nickel and other physical commodities to shield themselves from paper-money inflation, a Swiss commodity fund manager has said.
Ronald Wildmann, who manages three Basinvest funds from Zurich, said that buying hard industrial goods “is a bit of a trend” among the rich, who see few real estate opportunities and fear devaluation of liquid assets.
“When you look what is going on today with central banks increasing money supply and governments increasing on the debt side, you get a little worried about paper money,” he said.
“As a wealthy person, the worst that can happen to you is not that your relationship manager gives you bad advice. What is much more worrisome is when you wake up in the morning and you look out the window and paper money is worthless.”
Basinvest has two funds dealing in futures for metals such as nickel, platinum and zinc, as well as stocks in mining companies such as Rio Tinto and Xstrata.
Last June it launched a physical commodities fund which has drawn $20 million from ultra-high net worth individuals in Switzerland and Liechtenstein.
The BI Physical Commodity Fund invests mostly in commodities that are mainly traded on the London Metal Exchange and New York Mercantile Exchange.
The purchased goods are physically stored in LME warehouses or with forwarding agents that act on behalf of the respective exchange, according to Basinvest’s report for the fund in January, when its return was a negative 5.9 percent. In the eight months of 2009 following its launch in May, the fund returned a positive 36.7 percent.
Wildmann said the fund offered a solution to those unsettled by financial upheaval that shook equity and bond markets.
“What you can do is go into real assets. Real assets can be gold, art, diamonds or farmland. And they can also be industrial metals,” the former banker said.
Because the price of physical commodities is tied to their production costs, he said they offer a certain guarantee for those worried about inflation.
“Copper always has a price and the price is never zero,” he said.
Basinvest is bullish on iron ore, anticipating that economic rebound in China and elsewhere will cause shortages in the construction material steel and in coking coal, zinc and steel alloys, pushing up their prices.
Copper’s strong fundamentals make it another top pick for the fund manager, partly because of a dearth of new projects outside of the Democratic Republic of Congo and Mongolia.
Wildmann said that platinum and palladium were strong bets because of rising production costs in South Africa, and took a bullish view on ferro-chrome, produced in South Africa and Kazakhstan and used in stainless steel. But he was more bearish on gold, saying the price had far outstripped production costs despite little actual utility for the precious metal.
“There is absolutely no use for gold today. When you think about the world without gold, nothing would happen, but a world without copper or alloy or zinc is not running anymore. That is a huge difference,” Wildmann said.
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In Fear of ‘Worthless’ Paper, Rich Buy Hard Commodities
February 14, 2010
Geneva. The ultra-rich are increasingly buying copper, nickel and other physical commodities to shield themselves from paper-money inflation, a Swiss commodity fund manager has said.
Ronald Wildmann, who manages three Basinvest funds from Zurich, said that buying hard industrial goods “is a bit of a trend” among the rich, who see few real estate opportunities and fear devaluation of liquid assets.
“When you look what is going on today with central banks increasing money supply and governments increasing on the debt side, you get a little worried about paper money,” he said.
“As a wealthy person, the worst that can happen to you is not that your relationship manager gives you bad advice. What is much more worrisome is when you wake up in the morning and you look out the window and paper money is worthless.”
Basinvest has two funds dealing in futures for metals such as nickel, platinum and zinc, as well as stocks in mining companies such as Rio Tinto and Xstrata.
Last June it launched a physical commodities fund which has drawn $20 million from ultra-high net worth individuals in Switzerland and Liechtenstein.
The BI Physical Commodity Fund invests mostly in commodities that are mainly traded on the London Metal Exchange and New York Mercantile Exchange.
The purchased goods are physically stored in LME warehouses or with forwarding agents that act on behalf of the respective exchange, according to Basinvest’s report for the fund in January, when its return was a negative 5.9 percent. In the eight months of 2009 following its launch in May, the fund returned a positive 36.7 percent.
Wildmann said the fund offered a solution to those unsettled by financial upheaval that shook equity and bond markets.
“What you can do is go into real assets. Real assets can be gold, art, diamonds or farmland. And they can also be industrial metals,” the former banker said.
Because the price of physical commodities is tied to their production costs, he said they offer a certain guarantee for those worried about inflation.
“Copper always has a price and the price is never zero,” he said.
Basinvest is bullish on iron ore, anticipating that economic rebound in China and elsewhere will cause shortages in the construction material steel and in coking coal, zinc and steel alloys, pushing up their prices.
Copper’s strong fundamentals make it another top pick for the fund manager, partly because of a dearth of new projects outside of the Democratic Republic of Congo and Mongolia.
Wildmann said that platinum and palladium were strong bets because of rising production costs in South Africa, and took a bullish view on ferro-chrome, produced in South Africa and Kazakhstan and used in stainless steel. But he was more bearish on gold, saying the price had far outstripped production costs despite little actual utility for the precious metal.
“There is absolutely no use for gold today. When you think about the world without gold, nothing would happen, but a world without copper or alloy or zinc is not running anymore. That is a huge difference,” Wildmann said.
