Mercer study: having up to 5 percent gold in your portfolio considerably reduces the risk of loss

News 25.05.2011

Study on gold as an asset class for institutional investors

Deutsche Börse Commodities: The Mercer study examines the effect of holding a certain proportion of gold on the performance of a portfolio of large-cap shares and government bonds. To this end, it defines two different scenarios: a normal market environment scenario and a stress scenario. In a nutshell, investment in gold was shown to be a sensible diversification of a portfolio, particularly in times of crisis. The study also shows that adding gold reduces the risk of loss in achieving any target return or that the expected return for any targeted risk of loss is higher.

"For institutional investors who are not permitted to make direct investments in gold for regulatory reasons, we consider ETPs to be a suitable form of investment for participating as directly as possible in the performance of the gold price," said Dr Heinz Kasten von Mercer. "However, we should take into account whether this ETP is secured by physical gold and its market price is thus directly coupled to the gold price. In addition, investors should ask themselves whether the price of the ETP will perform systematically differently from the gold price over time, for example through a certain fee structure."

"Xetra Gold is the only product on the market that is backed by physical gold and doesn't show a tracking error because the management fees are not taken out of the portfolio," said Martina Gruber, managing director at Deutsche Börse Commodities GmbH. "It is the first choice for institutional investors because it's inexpensive, flexible and very safe."

"Since mid-2010, insurance companies in Germany have also been allowed to purchase Xetra Gold for their restricted assets in the amount of up to 5 percent of their commodities investment," said Steffen Orben, managing director at Deutsche Börse Commodities GmbH. "The Mercer study proves that the risk of loss can be considerably reduced in this way."


About Xetra Gold
Xetra Gold (ISIN: DE000A0S9GB0) is a 100% gold-backed bearer bond issued by Deutsche Börse Commodities GmbH that represents the right to the delivery of gold. Each individual Xetra Gold note grants the investor the right to demand the delivery of one gram of gold from the issuer. The issuer holds a corresponding amount of physical gold and a limited amount of gold leaf rights for each Xetra Gold note. The fact that Xetra Gold takes the form of a security makes it fungible and as easy to transfer as a share. Xetra Gold conforms to the European UCITS criteria for securities investment, and is thus also suitable for institutional investors. Thanks to an amendment to the BaFin Regulation on the Investment of Restricted Assets of Insurance Undertakings, insurance companies in Germany have also been allowed to purchase Xetra Gold for their restricted assets in the amount of up to 5 percent of their commodities investment since 29 June 2010. The international derivatives exchange Eurex offers futures and options on Xetra Gold. Xetra Gold can also be deposited as collateral with Eurex Clearing, Europe’s largest central counterparty. Xetra Gold is admitted for sale to the public in Switzerland, Austria, Luxembourg, the UK and the Netherlands, as well as Germany.

About Deutsche Börse Commodities GmbH
The Xetra Gold issuer Deutsche Börse Commodities GmbH, based in Frankfurt, is a joint venture between Deutsche Börse AG and the banking partners Commerzbank AG, Deutsche Bank AG, DZ Bank AG, B. Metzler seel. Sohn & Co. KGaA, and Swiss-based bank Vontobel. Umicore AG & Co. KG, a Group subsidiary of Umicore s.a. which operates several gold refineries across the globe and manufactures gold bars, is also a partner. The issuer’s sole business purpose is to provide the market with Xetra Gold, the bond backed 100 percent with physical gold, and to enable efficient, transparent and cost-effective trading of this securitization of physical gold.

About Mercer
With over 18,000 employees in more than 40 countries, Mercer is one of the leading global service providers in consulting, outsourcing and investments. In Germany, Mercer has over 600 employees and is present in Berlin, Düsseldorf, Frankfurt, Hamburg, Leipzig, Mülheim an der Ruhr and Stuttgart. Its focus is on advising businesses in the areas of occupational pension schemes, remuneration, human capital strategy, M&A and investments and benefits outsourcing.

Xetra® and Xetra Gold® are registered trademarks of Deutsche Börse AG.
    
 

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