Absolute Gold

Nothing like a stockmarket correction to suddenly remind investors of the benefits of diversification '” and that increasingly means the broad church of absolute return funds that chase a profit, not an index, whatever the overall markets might be doing. Our feature last Monday (0ctober 3) by David Kent of Everest Capital on how to choose such a fund was timely.

More commonly (but mistakenly) called hedge funds, these high-fee exotics not very long ago were seen purely as a plaything of the rich, making fabulous returns for the few. They also made fabulous losses from time to time, with Long Term Capital Management being only the biggest and most famous failure.

Now, in one variant or another, they are a common part of mainstream portfolios. The variety of absolute return funds is immense, but as an example of the sort of diversification now tailored for retail investors, I spoke to GoldLink executive chairman Richard Kovacs on Thursday, just as the stockmarket was turning down.

I’ll disclose straight away that the Pascoe family super fund has a small position in GoldLink IncomePlus (ASX code: GLI) and GoldLink GrowthPlus (GLC). GLI has averaged a total return of about 24% a year over its six-year life, the past two years as a listed vehicle. GLC was floated in August with a greater capital-growth bias.

The difficult part for most investors is understanding exactly what they are putting their money into with GoldLink. We’ll tackle that in the second part of the interview in Monday’s edition of Eureka Report. With this week’s equities losses feeling fresh in the wallet though, part one of the Kovacs interview looks more broadly at the potential for absolute return funds to become a bigger part of the local investment universe.

There’s also Kovacs’ outlook for the gold price. GoldLink really doesn’t care much if gold rises or falls as long as it’s moving; you can’t manage more than 14 million ounces of the yellow metal without developing a feel for the market.