Russell Global Gold Fund shines with 90% returns

February 05, 2009

Agriculture-related equities have also performed strongly with the ETFS S-Net ITG Global Agri Business Fund (AGRI) - which tracks the returns of globally listed companies involved in agriculture - up 18% since 5 December 2008 (a 110% annualized return). Investors appear to be attracted by agriculture's defensive nature (agricultural prices tend to have a low correlation to the business cycle) and the agriculture sector's relatively strong supply-demand fundamentals.

Yesterday, the Baltic Dry Index rose a record 15% in one day. It has been reported that the number of idle capesize ships fell to almost zero after being around 25% a couple of months ago. The ETFS Russell Global Shipping Fund (SHIP) shows a high positive correlation to the Baltic Dry Index. However the Baltic Dry Index is up 70% over the past month in contrast to SHIP which is down 10% as a result of the recent pressure on global equities.

Interestingly, a number of other ETFs exposed to growth themes also performed well last week, indicating that investors may see value in current valuations. The ETFS Russell Global Coal Fund (COAL) was up over 7% last week while the ETFS Russell Global Steel Large Cap Fund (STLL) rose 6.5%.

ETFs tracking the broad US equity market, the ETFS Russell 1000 Fund (RONE) and ETFS Russell 2000 Fund (RTWO) also saw a rebound last week, rising by 1.1% and 0.7% respectively. Historically the Russell 2000® - which provides exposure to US small cap equities - has seen the strongest returns versus major US equity markets indices when the business cycle turns up while the Russell 1000® - which tracks 90% of US large cap equities - tends to relatively outperform during downturns. ETF Securities is the first European issuer to list ETFs on both the Russell 1000® and Russell 2000® indices - being the two most tracked US equity indices.

Nicholas Brooks, Head of Research and Investment Strategy, at ETF Securities, said: "Commodity-related equity ETFs have seen extremely strong performance recently as investors have increasingly focused on longer term fundamentals supporting commodity prices after extreme drops in the share prices of mining companies. The ETFS Russell Global Gold Fund (AUCO), which tracks global gold mining companies, has been the best performing ETF, rising 90% since the 28 October 2008. Even at current levels, it is trading at a discount relative to its historic relationship with the gold price.

"Shipping equities may also provide good value following their very severe drop over the past eight months. The ETFS Russell Global Shipping Fund (SHIP), which historically has had a high correlation to the Baltic Dry index, is down 10% over the past month while the Baltic Dry index has risen 70% over the same period. Yesterday alone the Baltic Dry index rose 15%, indicating that if this historical relationship holds there may be scope for a rebound in SHIP."

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