Gold ETF adds glitter to Reinet portfolio

REINET, the specialist investment company controlled by Johann Rupert, has taken a shine to gold. Interim results yesterday showed it had invested €22m in SPDR Gold, the largest physically backed gold exchange traded fund (ETF) in the world.

Reinet is largely perceived as a defensive investment vehicle customised to protect capital. Although gold is often seen as a store of value in volatile investment times, Reinet — which was formed in 2008 — has not shown an inclination for physical commodities, although it does own South African-based diamond recovery interests.

No further detail was provided, save to say Reinet held 230,000 SPDR Gold shares at the end of September.

Mergence Investment Managers portfolio manager Bradley Preston said the shift into a gold ETF was interesting.

“It’s not really a common move for a listed holding company,” he said.

While some may frown on Reinet’s newfound enthusiasm for a barbarous relic, the gold investment is at least offset by more modern tilts into the digital music industry and a 3D manufacturing initiative.

The SPDR investment is minuscule in the greater scheme of things, with Reinet’s core minority holding in British American Tobacco (BAT) still dominating the portfolio. The interim results showed the holding in BAT — worth about R56bn — increasing to 72% (last year: 70%) of the investment portfolio. Mr Rupert said the investment in BAT was kept under constant review, “considering the company’s performance, the industry outlook, cash flows from dividends, stock market performance, volatility and liquidity”. Reinet holds 74.3-million BAT shares, equivalent to a 3.9% stake in the tobacco giant and received €149m (R2.26bn) in dividends.

While the BAT investment value appreciated, most of Reinet’s other investments — including UK-based financial services specialist Pension Corporation (Penscorp), as well as a number of private equity and specialist investment vehicles — lost value in the interim period.

Mr Preston pointed out that the euro strengthened over the interim period, which had a negative effect on the value of holdings outside of BAT. He said the €92m (R1.4bn) downward valuation of 43%-owned Penscorp — Reinet’s second-biggest investment at €815m (R12.4bn) was “slightly disappointing, but nothing to worry about”.

The gold investment is at least offset by more tilts into digital music

DEMAND for gold bars and coins hit a near two-year high in the September quarter because of low prices, underpinning an 8% year-on-year increase in demand for the metal, the World Gold Council said.

With the gold price dropping to a five-year low of $1,080/oz ahead of expectations that the US Federal Reserve would raise interest rates, investors took the opportunity to buy the physical metal, the council said in its third-quarter demand report.

Demand for gold bars and coin rose 33% to just shy of 296 tonnes compared with the same period a year ago and up 46% on the previous quarter, it said.

“Coming on the heels of a tough second quarter, the reaction to the price drop was magnified to a certain extent.”

Total demand for gold in the September quarter rose 8% to 1,120.9 tonnes, aided by a 6% increase in jewellery buying. At 632 tonnes, this was the highest level of third-quarter jewellery demand since 2008, it said.

While buying by central banks was down 3% year on year to 175 tonnes, the level of demand from this sector was close to last year’s third quarter record of 179.5 tonnes, it said.

Global mined production was 1% lower at 828 tonnes.

The World Gold Council warned that the offsetting of declining production from SA and the US by new mines had largely come to an end.

Production was 1% lower