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Analysis: Bullion Management Group was the first company to bring the concept of individual investors holding precious metals directly when they launched their BMG Bullion Fund back in March 2002. The concept was simple – the fund would hold equally weighted portions of fully allocated, unencumbered gold, silver and platinum bullion on behalf of investors. BMG was really the only game in town when it came to investing in bullion until. 2009, when Sprott launched their Sprott Gold Bullion Fund.
Since then, there have been a number of other product launches, including the October 2009 launch of the BMG Gold Bullion Fund. Like the Bullion Fund, this fund holds only fully allocated, unencumbered gold bullion on behalf of investors. There is really no management or tactical decision making that goes along with the fund, which is why I am surprised that the MER on the fund is 3.06%.
In addition to the unreasonable cost, another issue I have with this fund is that it is rated a medium risk fund. I could not disagree with this risk rating more. The fund has a monthly standard deviation that is well in excess of the broader S&P/TSX Composite Index. Therefore, to call this one sector fund a medium risk investment is a potential disservice to investors and could potentially cause significant harm to anyone relying on the fund’s prospectus as a guide for the risk rating.
While there can be a reasonably compelling case made for holding gold bullion in your portfolio, it is my opinion that there are better ways to access it. These would include the Sprott Gold Bullion Fund (SPR 216) or the Mackenzie Universal Gold Bullion Class Fund (MFC 2989), both of which provide similar exposure to gold bullion, but do so at a much lower cost than the BMG Bullion Fund.