New Gold ETF’s Rise Shows Low Cost Is King for Wary Investors

#Lifestyle Wealth

(Bloomberg) -- A weeks-old exchange-traded fund backed by gold is becoming an unlikely winner in a down year for the precious metal.

iShares Gold Trust Micro, which debuted in June, has amassed about $560 million in assets. At a time when the outlook for gold has grown more uncertain, investors may be willing to take a chance because of the fund’s relatively low costs. Gold prices have slipped about 9% this year.

The inflows into the iShares fund buck a broad trend in gold ETFs, where investors ranging from family offices to pension funds have significantly cut their holdings this year amid successful vaccine rollouts, stronger-than-expected economic recoveries in some countries and the possibility of rising interest rates. Demand for bullion ETFs was a pillar in the metal’s ascent to a record last year.

The 15-basis-point cost for the fund is the lowest available among physical gold ETFs, according to Nate Geraci, president of the ETF Store, an advisory firm. The average fee on physical gold ETFs is 22 basis points, Geraci said. The value of total gold ETFs tracked by Bloomberg has fallen 14% this year to about $174 billion, according to Bloomberg data.

“Flows into IAUM are unsurprising given investors’ laser focus on cost,” Geraci said, referring to the fund by its ticker symbol. “As long as IAUM remains the low-cost leader, I would expect accelerating flows into the ETF.”

iShares charges $1.50 in annual fees for every $1,000 invested, compared with a $7.10 average for active equity ETFs, and $5 for passive equity funds, according to data compiled by Bloomberg.


--With assistance from Claire Ballentine.

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