| Fund Company | Bullion Management Services |
| Fund Type | Miscellaneous Commodity |
| Rating | B |
| Style | N/A |
| Risk Level | Medium |
| Load Status | Front End |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | BMG Management Team since March 2002 |
| MER | 3.05% |
| Code | BMG 100 – Front End Units |
| Minimum Investment | $1,000 |
Analysis: The BMG Bullion Fund is the granddaddy of all the bullion funds in Canada, having been launched more than four years earlier than any of its competitors. It was the first fund that allowed for small retail investors to invest directly in the physical gold and precious metals rather than in the stocks of companies involved in the precious metals production.
The approach of the fund is very simple – it invests in equal amounts of physical gold, silver and platinum bullion. It does not invest in any derivatives, futures contracts, options or certificates. The fund also does not rebalance its holdings or attempt to time the market. The fund does not hedge currency, but a U.S. dollar denominated version is available to investors. The bullion is held in allocated, insured storage in the vaults of ScotiaMocatta.
This is not a pure gold play because of its exposure to silver and platinum. Platinum, with its use in the automobile industry, hasn’t performed as well as gold and silver since the financial crisis, which has dragged the overall performance. The movement in the value of the currency has also hurt performance. Since gold is denominated in U.S. dollars, any strengthening in the Canadian dollar hurts.
Another drawback to this fund is that it is expensive. It has an MER of 3.05%, which is higher than many of its peers. For example, the Sprott Gold Bullion Fund has an MER of 1.10% and the Mackenzie Universal Gold Bullion Fund has an MER of 2.59%. However, both of those funds have the option of investing in gold certificates, which aren’t as safe as the physical bullion.
There are many reasons to want to invest in physical bullion, namely that it acts as a great hedge against rising inflation, and has also been a safe haven in periods of high levels of uncertainty.
For those looking for diversified exposure to precious metals, this is really the only game in town. If you’re looking for more specialized precious metals holdings, then there are other lower cost options available such as the two funds mentioned above.