Pension funds will increase gold holdings to acquire “financial insurance"

Discussion in 'Wall St. News' started by Debaser82, Oct 25, 2009.

  1. Pension funds will increase gold holdings to acquire “financial insurance,” pushing prices higher as currencies drop, according to Shayne McGuire, director of global research at the Teacher Retirement System of Texas.

    “I think the largest institutions like our own are realizing that we barely own any,” McGuire said in an interview in Hong Kong. “The same thing applies to most of the pension funds which manage trillions of dollars in world wealth.”

    Record government debt and interest rates close to zero percent are pushing gold higher for a ninth straight year as investors seek to protect their wealth against the prospect of rising inflation and currency debasement. Teacher Retirement, backed by $95 billion in assets, has launched its first internally managed gold fund, worth $250 million, invested in precious metals, mining stocks and exchange-traded funds. McGuire is the portfolio manager of this new fund.

    The fund is “a reflection of our interest in gold,” said McGuire, the author of “Buy Gold Now” published in March 2008 that correctly predicted the metal will rally. “That’s mostly because of diversification” that benefits our overall portfolio.

    Gold represents only 0.4 percent of total global financial assets valued at around $200 trillion in 2007, McGuire said, adding the future focus for the metal was investment demand.

    “The interest in the gold sector continues to be strong,” said Stephen Goodman, investment banker with New York-based Casimir Capital L.P. “We are pleased to connect a growing number of institutional investors globally with opportunities.”

    Losses, Writedowns

    Gold for immediate delivery climbed to a record $1,070.80 an ounce on Oct. 14 and traded at $1,059.25 at 4:42 p.m. in Singapore. It has risen 47 percent in the past year. Gold for December delivery in New York traded at $1,059.70. McGuire said it’s “difficult to estimate how quickly it will rise,” and saw “significant upside” in the next two to three years.

    The U.S. Dollar Index, which measures the currency against those of six major trading partners, has fallen 7.5 percent this year as President Barack Obama increased the nation’s marketable debt 22 percent to $7.01 trillion to revive growth.

    Financial institutions worldwide have reported credit losses and writedowns of about $1.62 trillion since the start of 2007, when the credit crisis began. Group of 20 governments have pledged about $11.9 trillion to ease credit and revive economic growth, according to the International Monetary Fund.

    ‘Financial Insurance’

    “I don’t think the question really is what is gold worth but what are currencies not worth,” McGuire, 43, said yesterday. “Consider the tremendous fiscal excess that major governments have made to prevent the world economy from collapsing,” he said. Owning gold today is “financial insurance,” he said.

    McGuire, with 15 years of international financial experience, has worked for the seventh-largest pension fund in the U.S. since 2001. He had managed a $2 billion European equity portfolio and was ranked among the best Latin American analysts by Institutional Investor in 1995 and 1996, he said.
  2. Another place for pensions to get blown away.
  3. Perfect timing.
  4. The infamous"diversification" argument. Didn't the pension funds say the same nonsense when they purchased those commodity swaps courtesy of Goldman Sachs crude oil to $200 call in the summer of 2008?

    Why are these idiots never buying stuff for diversification after it's down 80%? Why only after stuff is up 500%?
  5. Where do you see opportunities in assets that are down 80% from their all time high?