Taurus Shuts Gold Fund on Redemptions After Price Tumbles; product once held as much as A$250 million ($240 million)

June 6, 2013 Leave a comment

Taurus Shuts Gold Fund on Redemptions After Price Tumbles

Taurus Funds Management Pty Ltd. shut its precious metals fund because of investor redemptions after gold slumped, according to an executive, who said that the product once held as much as A$250 million ($240 million).

Assets in Taurus Precious Metals peaked last year before the closure in May, Gordon Galt, a principal at the Sydney-based fund manager, said in an interview today, declining to comment on the level last month. As of February, the fund had invested mostly in physical gold, according to a report to investors for that month, which was confirmed by Galt.

Taurus Funds’ decision reflects a shift by some investors away from bullion and into other assets as signs that the global economy was recovering drove gold into a bear market while equities rallied. Withdrawals from gold-backed exchange-traded products reached a record pace this year, and Nouriel Roubini has forecast that gold may fall toward $1,000 an ounce by 2015.“We had a number of investors in April and May who decided to allocate their funds into other sectors,” Galt said. “Given the reduction in AUM, we decided that it was better to shut the thing down rather than keep it going,” he said, using the initials for assets under management. Taurus Precious Metals was a so-called long-only fund, betting on price increases.

Five people who worked at the fund left, according to Galt. Brenton Saunders, who co-managed Taurus Precious Metals, confirmed his departure in May, and said that he had started at BT Investment Management Ltd. in Sydney. Mohendra Moodley, the other co-manager, said that he left Taurus in April and declined further comment.

Record Sales

Gold for immediate delivery, which rallied for a 12th year in 2012, traded at $1,401.70 an ounce at 2:22 p.m. in London after Singapore after losing 16 percent this year. The price slumped to $1,321.95 on April 16, the lowest since January 2011. Investors have sold a net 490 metric tons from ETPs this year, cutting holdings 19 percent, according to data compiled by Bloomberg.

Taurus Precious Metals also invested in other precious metals and related equities, according to fund documents. Silver has lost 26 percent this year as platinum dropped 2.4 percent, while palladium advanced 6.9 percent.

A lack of inflation and better returns from other assets such as equities are two of six reasons why gold will trend lower, according to Roubini, professor of economics and international business at New York University. Gold will drop as the economic recovery curbs demand, Roubini wrote in an article published June 1 on commentary website Project Syndicate.

Soros, Paulson

Billionaire George Soros cut holdings of gold-backed ETPs in the first quarter, while John Paulson maintained a stake. Soros Fund Management LLC lowered its investment in the SPDR Gold Trust, the biggest such fund, 12 percent to 530,900 shares as of March 31, compared with three months earlier. Paulson & Co., the largest investor in SPDR, held 21.8 million shares.

Equities tracked by the MSCI All-Country World Index have advanced 7.5 percent this year as the Standard & Poor’s 500 rallied to a record. In a survey, 54 percent of international investors said equities will offer the highest returns over the next year, while more than two in five intend to cut their exposure to gold over the next six months, according to a Bloomberg Global Poll published last month.

Taurus Funds, founded in 2006, has two private-equity funds with combined assets under management of more than A$500 million, according to Galt. The firm specializes in the mining industry, according to its website.

To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

Filed under Macro Trends

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