Wealth group Ravenscroft has been building exposure to gold in client portfolios over the course of 2020, with CIO Kevin Boscher expecting the precious metal's value to grow further in sterling terms in the coming years, while offering a hedge against economic and geopolitical uncertainty.
The Channel Islands-based group, which has roughly £7.5bn in AUM, has been bolstering physical holdings of gold through its precious metals business and building up exposure to the Gold Bullion Securities ETF throughout the year.
Gold has performed well against the backdrop of market turmoil seen in 2020, rising from roughly $1,500/oz at the start of the year to beyond $2,000/oz by early August.
Speaking to Investment Week, Boscher said the outlook for gold "is positive, not just in the short term, but over longer term", amid unprecedented monetary and fiscal stimulus and "the prospect for a weakening dollar".
He explained that while Ravenscroft had traditionally used Treasuries, gilts or cash as a hedge in portfolios, the group is now looking to gold as a better method of downside protection for client portfolios.
Boscher said: "Gold acts as a hedge against a new inflationary cycle on the back of a very loose monetary policy, lots of liquidity and some supply side disruption.
"It is also a hedge against the increasingly challenged macro and geopolitical environment that we find ourselves in.
"In times of uncertainty, when you expect high volatility on financial assets, gold tends to give you some decent protection against that. And of course, then you've got the weaker dollar argument as well.
"Gold is something we want to own in most of our portfolios, predominantly as a hedge. But for our advisory clients, we also see it as an investment in itself, which is likely to appreciate over the coming years."
UK continues to look cheap
The FTSE 250 has continued to lag other global equity markets in 2020, returning returned just 15.3% over five years compared to the MSCI World's return of 79.3%, according to FE fundinfo.
Year-to-date, the FTSE 250 remains down 17.8% while the MSCI World has recovered from mid-March lows to return 3.8% since the start of the year.
Boscher said there remains "a lot of reasons to be cautious on the UK", including a "slow exit from lockdown" compared to European counterparts, the end of the Brexit transition period in December, and a "less aggressive" fiscal stimulus response to the coronavirus pandemic compared to other countries.
However, "on a two or three year view, UK assets are very cheap", according to Boscher, with "a lot of a lot of uncertainty and downside priced in at this level".
"It is something that we want to take advantage for our clients on a longer term view," he added.
Boscher said Ravenscroft will be looking to increase its exposure to the country "and take advantage of the eventual UK recovery", primarily through small-cap equities via actively managed funds and investment trusts.
He cited Blackrock Smaller Companies and Henderson Smaller Companies as examples of current holdings the group is using to benefit from the eventual UK recovery.
In this series, Investment Week speaks to senior figures at asset management and wealth firms about the big global debating points for managers and investment committees