Tags: superfund | gold | hedge

Superfund Offers New Gold Hedge

Monday, 19 Oct 2009 09:35 AM

By Julie Crawshaw

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Superfund’s new gold-denominated managed futures fund allows investors to do two things, says company president Paul Wigdor: hedge portfolio risk by adding an asset class un-correlated to stocks and bonds and diversify currency risk.

Superfund (www.superfund.com) is an international consortium of investment companies specializing in trading and offering managed futures, with offices worldwide and managing investments in 120 global markets.

Once a pure-play managed futures fund, the company has taken a new twist by adding Superfund Gold, a new fund series that “de-links” each fund’s net asset value from the U.S. dollar.

In effect, gold is the currency used to value the funds, rather than a potentially risky government-backed paper currency.

“If the gold market starts to decline, we can be short gold in the underlying fund at the same time we’re long gold as the ‘currency’ you’re investing through,” Wigdor told Newsmax.

“It gives you some hedged exposure to gold, whereas if you just buy gold stocks, regular futures, or physical gold, you’re simply betting that gold is going to continue to go up.”

Having a fund denominated in gold with a trading strategy that can be long or short provides a substantial benefit, notes Wigdor, who says investor response has been enthusiastic since the fund became available in the United States last April.

“I think people are very excited to learn they can invest in a fund that uses gold as a currency,” he says.

Superfund COO Vito Fossella says the company’s main aim is to empower the individual investor to diversify their investments across all asset classes.

“We like to think of it as a L.I.F.E. principal: Lower risk and volatility potential; Increase in profit and performance potential; Favorable correlation; and Enhanced diversification,” Fossella says.

The gold fund employs the same trading strategy the company has been offering here since 2002; only the denomination has changed. It invests in futures for stock indices, currencies, bonds, grains, energies, metals, agricultural markets, and livestock and uses gold futures to convert dollars into gold.

"The ability to add managed futures to their portfolios gives retail investors the same advantage institutional investors and ultra high net worth individuals have enjoyed for decades," says Wigdor — and Superfund’s minimum investment of $5,000 is well within an ordinary investor’s range.

It’s certainly worth noting that Superfund’s two traditional funds were up 30 and 46 percent last year.

Like their traditional, dollar denominated funds, Superfund offers two versions of its gold-denominated fund — the Series A and Series B. Both funds employ the same trading strategy, but the more aggressive Series B uses 1.5 times the leverage of the Series A and therefore is intended for investors who are willing to take on more risk in exchange for the possibility of greater growth.

Wigdor believes that one of the main reasons stocks have been under water over the last decade is that the dollar has been underperforming.

“Is it really that equities have been flat, or is it that the dollar has been underperforming?” Wigdor asks.

“Think about it: Investors who bought the Dow Jones Average denominated in dollars over the past 10 years annualized minus 0.62 percent. Had they been able to buy the Dow denominated in gold, their investment would have annualized 12.26 percent. Gold on its own has annualized almost 13 percent over the past 10 years."

Gold provides investors with a unique way to use the managed futures strategy for investors who want exposure to gold and to diversify their currency risk.

“It can be argued, with the tremendous amounts of government debt incurred and fluctuating currencies, that gold will continue to be a safe haven for those concerned with their personal and financial well being,” Fossella notes.

"Clients love the new gold fund because they are worried about inflation, which is sure to happen if the government keeps on printing money," observes financial adviser Timothy Ruecker, CLU, ChFC, president of Nirvana, Inc.

“I think gold is a natural way to protect against inflation, but what are the options?” Ruecker asks.

“Buy bullion and store it under their beds? And buying gold stocks isn’t really different than buying other stocks; they go down when the market does.”

“Superfund’s gold fund is a great way to give clients a way to hedge against the dollar and diversify their portfolios at the same time.”

Yet Ruecker believes the Superfund funds are good even denominated in dollars because they add what he describes as “a much-needed dimension to investors’ portfolios” by providing an asset class that is generally not correlated to the market movements of stocks and bonds.

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