| Fund Company | Bullion Management Services |
| Fund Type | Miscellaneous – Commodity |
| Rating | $ |
| Style | N/A |
| Risk Level | High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Poor |
| TFSA Suitability | Poor |
| Manager | BMG Management Team |
| MER | TBD |
| Code | BMG 300 – Front End Units BMG 304 – Low Load Units |
| Minimum Investment | $1,000 |
Analysis: Bullion Management Group, one of the pioneers in bringing investing in precious metals bullion to retail investors is at it again with the launch of their new BMG Gold Advantage Return Bullion Fund. The fund is designed to pay investors a monthly distribution of $0.07 per unit. At current prices that is an annualized yield of around 7%.
At the risk of sounding cynical, it is my opinion that this is purely a marketing play. It is well known within the industry that you can slap the words income or yield on any fund and investors will buy it in droves, regardless of the quality of the fund or the need it serves in a portfolio. That is exactly what this sounds like to me.
Basically what they are doing is setting up a new fund to invest in their existing BMG Gold Bullion Fund and pay investors a monthly distribution. The big problem I see with this is that gold does not generate cash flow and any distributions will be paid from capital gains or as return of capital. In other words, if the BMG Gold Bullion Fund earns more than the distribution payouts, plus fees, there will be no erosion in your capital. If it doesn’t, they are just giving you your money back.
The management fee for this fund is set at 2.25%. When you add on your operating expenses and taxes, the all in MER will likely be north of 3%, based on the other funds offered by BMG.
Don’t get me wrong, we are not against holding gold in your portfolio. There are a number of reasons why doing so makes sense. Historically, gold has been a wonderful hedge against inflation, and it has also exhibited low or negative correlation to the other major asset classes making it a great diversifier in a portfolio.
Basically, if you want gold exposure in your portfolio, buy a bullion fund. If you want income, there are a ton of great options available at a much more reasonable price.