Taurus Funds Management has expanded its fund range with the launch of a new precious metals fund, and is exploring the possibility of establishing a global small mining companies fund.
Taurus has opened its Global Precious Metal fund to institutional investors and has already attracted a number of clients, including US family offices, while it is in the process of signing up an unnamed Australian institutional investor.
"It is effectively an adviser dealer group, but they are not fully invested yet," Taurus director Brenton Saunders said.
The fund invests predominantly in gold, both physical-backed exchange-traded funds (ETFs) and equities.
The Cayman Island-domiciled vehicle has a similar structure to a precious metals mandate that the firm runs for ING Australia's Optimix superannuation funds, but the new fund can have a larger exposure to equities than the ING mandate.
Saunders, however, is not keen on having a large exposure to companies.
"If you go back two, 10 or 20 years, gold companies have underperformed the gold price," he said.
One of the reasons for this is that the costs of gold companies increase rapidly as the gold price increases, Saunders said.
Miners tend to access more inaccessible deposits as the gold price increases and this increases their costs.
"The gold industry is very fragmented. If you don't mine it, someone else will," Saunders said.
The current allocation of the fund is 92 per cent in physical gold, 6 per cent in gold equities and 1 per cent in silver equities, with the remainder sitting in cash.
Taurus, which is 20 per cent owned by Macquarie Group, is also looking to establish an open-ended small mining companies fund that would invest in early-stage businesses.
The fund manager already runs a fixed-term private equity fund with a similar focus, but clients have asked for a more liquid investment vehicle.
"It will be a highly volatile fund, but these companies have outperformed other small-cap sectors in the last decade. And small caps outperform large caps," Saunders said.
