ETFs are amassing never before seen stakes in dozens of small companies but the behaviour of the passive funds are giving some investors jitters.
According to a report in the Wall Street Journal there has been concern that the large amounts of funds rushing into the market are impacting rather than mirroring pricing.
“Whilst in the US domiciled products the assets under management are far bigger with the SDPR GLD ETF now showing an AUM of $35bn.”
Oil and gold prices RISE after Syrian airstrike
Ms Hutchinson added: “There has also been demand for the gold miners ETFs – VanEck in the US have both a Gold Miners ETF and a Junior Gold Miners ETF.
“Both have been extremely successful in gathering investor flows with the Gold Miners ETF assets reaching $11.8bn and the Junior Gold Miners ETF reaching $4.8bn in assets under management.
Precious metals are in vogue but ETFs are causing some concern
“VanEck which manages both the ETF and the Index itself (MVIS Global Junior Gold Miners Index) has announced that changes will be made to broaden the scope of the index.
Gold is a safe haven asset but investors are becoming more complex in how they handle it
“The changes are likely to mean that a further 24 shares may be included in the ETF (which are currently approximately 50 holdings) and which could potentially represent around 60 per cent of the ETF assets once changes are completed.”
A miner works at a gold mine in La Rinconada, the highest permanent settlement in the world in Peru
“Historically, it has performed well in periods of market turmoil and when inflation is rising so it seen as a form of portfolio insurance.
“Given the various potential issues across the globe from the Election of Donald Trump in the US and heightened tensions with Russia and China, to the flexing of North Korean muscles and more closer to home question marks over the future of the European Union it is no coincidence that demand for Gold has been growing.
“Gold is often described as the ultimate safe haven asset because of its tendency hold its value when other asset classes fall.
“You can invest in gold mining shares but you are then much more exposed to the management of individual companies and stocks rather than just the value of the commodity.