Erich Meier of Konwave AG, an investment manager at the marcus evans Elite Summit 2017, discusses the best timing to profit from the gold industry.
Interview with: Erich Meier, Chief Executive Officer, Konwave AG
"This is the time for wealthy families to invest in gold," advises Erich Meier, Chief Executive Officer, Konwave AG. "When the confidence crisis spreads to central banks then government bonds and currencies, the price of gold will skyrocket. However, gold mines will perform better than physical gold," he adds.
Konwave AG is an investment management firm at the marcus evans Elite Summit 2017, in Montreux, Switzerland, 6 - 8 November. www.elitesummit.com
What is unique about Konwave's philosophy and investment approach? Why is your fund focused on small cap companies?
We have a very disciplined valuation approach and we time the industry cycle more actively than our peers. During 2014/15, we positioned the fund for the new bull market, sold all physical holdings and increased our exposure to junior gold companies. Towards the end of the cycle we will add more royalties and physical gold. Overall, we have 5 - 15 percent more small caps than our major peers.
In a bull market, small caps do a lot better and are more entrepreneurial than large caps. The small cap tilt helps in bull markets but detracts performance in bear markets. That is why timing is crucial. In addition, large caps tend to have a growth problem. This is not an easy industry, so investors must work with an expert.
What risks are associated with small caps? How can they be mitigated?
We keep the fund well diversified with 100 to 120 companies, of which 40 - 60 are smaller companies. The liquidity risk is low. We get some losers but many more winners. We have seen large companies run into trouble because of one mine, so going with a large cap name does not mean lower risks. The management team must be a capable one. In the small cap space many managers have their own money in their company so their interests are aligned with that of investors.
Why gold mines instead of physical gold? Why now?
The benefit of gold in a portfolio depends very much on the cycle. We founded the company in 1999 when we saw a new bull market in gold developing. We are currently in the last few years of that bull market, which tend to be very attractive for investors. Gold is a very nice hedge against government, credit risk and equity markets.
Why gold mines and not physical gold? Investors are still burnt from the last five years when gold mines had big losses, rising costs and negative free cash flow. However, as the new cycle starts, costs are stable, gold miners have operative and financial leverage, the industry is disciplined and gold equities start to discount higher future gold prices. Since 2016, we have been in the early part of a new bull market where investors will be able to make more money from gold mines.
From the November 2000 lows until the end of 2002, gold mines rose over 300 percent while gold went up only 20 percent. When the market hits rock bottom, miners react very positively to rising gold prices. Last year our fund made over 90 percent while gold was up just 8.5 percent. We are at the sweet spot of the cycle when investors should consider gold mines.
We are at the third leg of a bull market where there will be volatility due to the confidence crisis developing on the political side (Trump and Macron elections, Brexit, etc). As the confidence crisis will spread to the central banks in the next one or two years, then to government bonds and currencies, the price of gold will skyrocket. When trust is on the way down, the price of gold goes up. That is why investors should look at gold right now.
Contact: Sarin Kouyoumdjian-Gurunlian, Press Manager, marcus evans, Summits Division
Tel: + 357 22 849 313
About the Elite Summit 2017
The Elite Summit is the premium forum bringing top tier buyers and sellers together. The Summit offers the independent advisors of wealthy private investors and international fund and asset managers an intimate environment for focused discussion of the key new drivers shaping wealth management asset allocations. Taking place at the Fairmont Le Montreux Palace, Montreux, Switzerland, 6 - 8 November, the Summit includes presentations on adapting portfolio strategies, reducing volatility, optimising the portfolio, building a stable and safe cash flow, and securing solid family succession.
The Investment Network - marcus evans Summits group delivers peer-to-peer information on strategic matters, professional trends and breakthrough innovations.
Please note that the Summit is a closed business event and the number of participants strictly limited.
Konwave AG is the largest Swiss-based investment manager focussing on gold equities. The company has one of the best long-term track records in the gold mining industry (Gold 2000, since 1999). Key products are Konwave Gold Equity Fund (UCITS IV) and Gold 2000 (Cayman fund). The funds are blend products (large, mid and small caps) and have proven to outperform active and passive peer products significantly, especially during bull market periods.
Konwave AG has a long-term, successful collaboration with very experienced and well connected top geologists, who are important contributors to the stock selection. The funds are managed by the partners/founders of the company, who are very experienced portfolio managers with extensive macro and industry knowledge. They also have invested major parts of their wealth into the funds. Key reason for the significant outperformance are the optimal size (USD 500 million), the active positioning based on the industry cycle, and the extensive network and knowledge within the small cap segment.
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