ETF risk?

I use SGLN and SPGP for gold investments (SPGP = gold mining and leveraged to the gold price). These iShares funds are run by Blackrock which I think is the biggest player; if you can't trust them, might as well give up.

beansOnToast wrote: »

I wouldn't worry too much about the Trustees in this case. Both are major players. The actual gold bars are held with the Custodian (JP Morgan in the case of both the funds you mention).
The trustee is responsible to making sure the assets at held safely by the custodian and that correct accounting and regulatory procedures are followed by the fund.

In the end, as EdGasket says, if you're concerned about any of the institutions mentioned (JPM, State Street, DB etc), then the whole market has much bigger problems and you may be better off steering clear of ETF market completely.

Observation: when Lehman Bros went under, it took bloody ages to unwind the assets held on behalf of loads of different counterparties. And Lehman wasn't around to pay you compensation for losses incurred while you couldn't access your positions.

The reason you will have heard of Lehman's, is because they were major players. So major that people were very surprised that they collapsed.

Yes, for Lehman's to go under there were bigger problems than just Lehman's going under. There was a big global financial crisis. However, in that crisis I was quite glad I hadn't directly held a meaningful portion of my assets in funds which were using Lehman as counterparty to a physical or derivative transaction. It turned out that they weren't safe to use even though they seemed big and famous.

northbob wrote: »

In short is it better to go with the USD version if the aim is returns that reflect the actual spot price of gold?

In short, they are not hedging the currency effect themselves within the fund, so you are just getting exposure to the underlying assets.

Say a kilo of gold is today worth 1 GBP or 1.3 USD.

Then after a year it "more than doubles" in value to 3 dollars, but the exchange rate has moved to 1.50:1 from its current 1.30:1, so in GBP terms it is worth 2 quid. So it merely doubled, not "more than doubled" in sterling terms.

The fund priced in GBP shows 100% gain. So you could buy that GBP fund at £100 and later sell at £200.

The fund priced in USD shows 130% gain. So you could use your £100 to buy $130, then sell it at $300, and say whoopee, i more than doubled my investment. But then to get pounds back again you sell the $300 and get £200. Which is the same position as just buying the GBP fund in the first place.

If the USD fund is more readily available and more liquid and your stockbroker or investment platform doesn't charge much in the way of fx fees to buy $130 to buy into the USD-priced version of the fund, then sure, you could buy that one. Most UK investors would just buy the GBP one if it was readily available.