One Canadian fund made a $700m bet on gold

The US Securities and Equities Commission (SEC) last week released the latest figures of major asset management companies’ holdings.

Germany's Goldreporter.de extracted the numbers for the world’s number one physical gold-backed ETF – SPDR Gold Shares (NYSEARCA: GLD) – and found massive bets were made in the first quarter about the direction for the gold price.

GLD dwarfs other exchange traded gold products holding more than 40% of the global total at 718 tonnes or 23.1m ounces.

According to the data, long-time top investor in GLD is still US billionaire John Paulson’s hedge fund with a holding worth a shade over $1.2 billion.

But the big news is out of Toronto where Canadian asset manager CI Investments purchased a whopping 6,117,900 shares worth $703.6 million during the first three months of the year. It has become the second largest holder of bullion in the fund with total holdings of $735 million.

That corresponds to 7.5% of the portfolio of CI Investment Inc according to its SEC 13F filing and made GLD the biggest single holding of the investment fund in Q1 2015, an even bigger position than shares of Apple Inc of $626.7 million (which, incidentally it reduced by 10.2%).

While CI Investments' dive into GLD is certainly noteworthy it also has to be seen within the context of the larger institution. The investment in GLD was spread among a number of mutual funds and was mostly done for hedging purposes, CI Investments tells MINING.com. The larger group CI Financial had consolidated assets under management of $109 billion at March 31, so GLD only represent about 0.6% of the total.

Swiss investment bank Credit Suisse also picked up a large number of GLD units in Q1 increasing its position 490% to just over 4 million shares worth $474 million.

The two weren't the only firms to make bullish bets – Lazard Asset Management doubled its holding to just over 2 million shares and Morgan Stanley (+18.3%) and Blackrock Group (+167%) were also huge buyers.

A Wall Street Journal report shows that the derivatives market in GLD is also showing a lot of action. Options GLD were among the most heavily traded Tuesday, with call options – a bullish bet to buy shares at a later date – dominating activity:

Today, as in in recent sessions, the GLD call buying has been driven by the idea that gold, as a safe-haven asset, could benefit amid the turmoil in currency and bond markets, says Rebecca Cheong, head of Americas equity derivatives strategy at UBS Securities. And since gold prices haven’t swung to the same degree as currencies and government bonds, that means GLD options are cheaper for investors looking to hedge, she added.

“The flow that we’ve seen on GLD is [from] multi-asset managers,” Ms. Cheong said. “It’s a tail hedge.”

GLD returns 150% over a decade of returns

GLD was listed on 18 November 2004 and enjoyed a pretty good first day. Investors bought just over 8 tonnes or 260,000 ounces of gold affording the fund a net asset value of $115 million.

A mere two days later it would cross the $1 billion mark and by the time Thanksgiving arrived the following week gold bugs had snapped up more than 100 tonnes. The 1,000 tonne market would be crossed in February 2009.

On August 22, 2011 when gold was hitting record highs above $1,900 an ounce GLD briefly become the largest ETF in the world briefly surpassing the venerable SPDR S&P 500 trust at a net asset value of $77.5 billion.

Gold holdings in the trust would peak more than a year later in December 2012 at 1,353 tonnes or 43.5 million ounces, representing almost half the ETF gold held around the world.

All of that came crashing down in 2013 as the gold price plummeted and investors pulled 552 tonnes from the fund. The extent of the panic was evident by the fact that GLD had only 17 days of inflows during the entire year.

After a few false dawns in 2014 GLD recored a second year of net redemptions. At 718 tonnes GLD's vaults are now as empty as they were September 2008, when the collapse of Lehman Brothers sparked a global financial meltdown.

Nevertheless, those who got in on the GLD ground floor are enjoying returns in excess of 150%.

Go to Goldreporter.de for the full breakdown of the latest holdings.

Hat tip: Jürgen Fröhlich