Julius Baer Starts Physical Gold Fund (Redeemable)

If you want to invest in an out-of-country gold ETF, here is some news you might find interesting. Reuters reports that Julius Baer starts physical gold fund:

(emphasis mine)

Julius Baer starts physical gold fund
Mon Oct 20, 2008 5:59am EDT

ZURICH, Oct 20 (Reuters) - Swiss wealth manager Julius Baer (BAER.VX) said on Monday it was launching a pure physical gold fund to address increasing demand by nervous clients to invest in the precious metal.

The fund invests exclusively in physical gold, mainly standard bars of 400 ounces or about 12.5 kilos, that are stored in high-security vaults in Switzerland.

Other gold exposure, for example through derivatives or metal accounts, is not allowed.

"Our clients want to invest into a safe haven that has no counterparty or balance sheet risk," said Stephen Mueller, from the physical gold team of Julius Baer.

"We are creating a pure gold investment fund with no risk in the balance sheet."

The fund will be listed on the SWX Swiss Exchange. Redemption in kind is possible.

Gold, which is liked by investors in time of uncertainty, breached $1,000 per ounce for the first time in March.

It has since fallen from its peaks but demand returned when the financial crisis deepened after the collapse of U.S. investment bank Lehman Brothers.

My reaction: Julius Baer Physical Gold Funds are attractive for several reasons. First, they are located in Switzerland outside the US. Second, they invest strictly in physical gold. Finally, unlike other ETF like GLD, Julius Baer Physical Gold Funds have the option of redeeming shares for physical gold. The funds started trading on October 31.


First Trading Day

Product Name

Issuer/Market Maker

Currency

Underlying

Mgmt Fee p.a.

31.10.2008

Julius Baer Physical Gold Fund (CHF) A - optional redemption in kind

Bank Julius Bär & Co. AG

CHF

1 oz physical gold

0.40%

31.10.2008

Julius Baer Physical Gold Fund (CHF) AX - no redemption in kind

Bank Julius Bär & Co. AG

CHF

1 oz physical gold

0.40%

31.10.2008

Julius Baer Physical Gold Fund (EUR) A - optional redemption in kind

Bank Julius Bär & Co. AG

EUR

1 oz physical gold

0.40%

31.10.2008

Julius Baer Physical Gold Fund (EUR) AX - no redemption in kind

Bank Julius Bär & Co. AG

EUR

1 oz physical gold

0.40%

31.10.2008

Julius Baer Physical Gold Fund (USD) A - optional redemption in kind

Bank Julius Bär & Co. AG

USD

1 oz physical gold

0.40%

31.10.2008

Julius Baer Physical Gold Fund (USD) AX - no redemption in kind

Bank Julius Bär & Co. AG

USD

1 oz physical gold

0.40%

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0 Responses to Julius Baer Starts Physical Gold Fund (Redeemable)

  1. MV says:

    Can you trust Julius Baer? If they get into trouble with bad bets in the market and go bankrupt, what happens to your gold?

    If the US defaults on its debt, would other nations (Switzerland et al) freeze the assets of US citizens, until it was all worked out?

    Thanks for your insights.

  2. Julius Baer physical gold funds are safe. Although an investor may be taking on the underlying risks of an ETF's portfolio holdings, they are not exposed to any risk from the issuer's financial state. For example, if State Street (NYSE:STT - News) were to go bankrupt (unlikely, even in these tumultuous times), investors in the SPDRs ETF (AMEX:SPY - News) would be made whole by their claims on the underlying stock investments held by the unit trust. The same princible applies to Julius Baer's physical gold fund: if Julius Baer failed, you would still your gold.

    "If the US defaults on its debt, would other nations (Switzerland et al) freeze the assets of US citizens, until it was all worked out?"

    No, they wouldn't. A lot of people have dual nationality, so it would be impossible to freeze the assets of just US citizens.

  3. Derek says:

    This gold etf uses 'unstamped bars' and not good delivery bars. this means if the fund goes bust and you want to sell them you cant. worse than that it might not be gold. whats worse is they use the london fixing as the funds nav. London fixing is only for good delivery metal. big deal. yes. if you want to sell unstamped bars you need to get the gold recast. it takes 4 weeks, costs a fortune and you get less gold back! thats as long as it turns out it is gold!

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