HANetf co-CEO Hector McNeil spoke to Proactive about rising investor demand for gold and defense ETFs amid global geopolitical tensions.
He outlined the performance of HANetf's gold-related products and defense-themed funds, and discussed how ETFs are helping investors hedge against volatility and currency risk.
Here, we taka a closer look at what was said.
Proactive: Hector, very good to speak with you again. It's been a very active time geopolitically over the past couple of months. And we've seen that reflected both in defence stocks but also in the gold price with the gold price topping $4,000 an ounce.
Tell us about that, because you give exposure to gold both through your Gold Mining ETF as well as Physical Gold ETC.
Hector McNeil: Yes, funny enough, I don't know if I ever told you, Stephen, but my previous company — the first ETF I worked at was ETF Securities and we were well known for inventing the first gold ETF in the world. And I actually said it on a call with a company today that, when we issued that gold ETF back in 2003, gold was $318 an ounce.
So, it just shows you how far the world’s gone since then. I think, actually, ETFs have a lot to answer for, for the rise in demand, because ultimately, they make it very straightforward for people to put gold in their portfolios. Rather than you put it under the bed or in the safe, dig a hole in the ground or whatever, you can safely go and buy your ounce of gold and buy it through a gold ETF.
That's where people have got 5 to 8% of their portfolio in gold now — and that’s what I pretty well recommend people to do anyway. It was very hard to do that before. So, yeah, we have both the physical gold side with the Royal Mint.
We've just got a smidgen under £2 billion in RMAU, which is our showcase gold ETC with the Royal Mint. That’s just under £1.65 billion, and then we created currency-hedged versions earlier this year. They're nearly £300 million now. We've done Swiss franc hedged, euro hedged, and GBP hedged.
So, obviously with Trump devaluing the dollar so aggressively, those are great trades to put on. And then, as you've quite mentioned, we do have a Gold Miners ETF, which had been pretty dormant for a long time in terms of inflows. Then it’s tripled in size, it's up to £65 million now, nearly £70 million.
And it's tripling in the last three or four weeks. I think people see gold miners as a geared play to the gold price. So if you want a leveraged play to the gold price, the gold miners are the place to go. What’s really nice about the Gold Mining ETF (ESGO) as well, it has an ESG screen.
We do screen out companies that we feel are not meeting that high standard. And obviously, in gold companies, there can be a lot of toxicity in mining. That’s where Physical Gold ETC (RMAU) differentiates, because it uses recycled gold, which is 98% less carbon intensive than mined gold because of the toxicity and the logistics involved in moving it around.
Then you've got the other side of the story with ESGO, which is the gold miners. So we’re very happy with both of those products. We feel we've got a very curated offering in that space — whether it’s physical gold, whether it's miners, or whether it’s currency hedged. There are five products there that are very interesting for people to use.
Proactive: So while the gold price has clearly benefited from geopolitical tensions and given its safe haven status, we've also seen the defence stocks doing very well. And due to those tensions, you now have three defence ETFs. So you've got your Global Defence, European Defence, and also the newest addition to the family, your Indo-Pacific Defence ETC. How has that done?
Hector McNeil: Yeah. The global defence one is NATO-focused, which screens just for NATO companies. That's unique. NATO's a defensive alliance, and we think it's really important to have that sort of screen — because you don't want to be putting money in companies that are looking to invade everybody.
Having the NATO screen gives an official capital markets way to invest and support those companies as well. We all know the threats we have with the likes of Russia, North Korea, and China. So from that perspective, it’s a great product.
Then we have ARMY, which is the European product — that's a couple of hundred million. So we're getting almost £3.5 billion now in defence products.
Return-wise, the Gold Mining ETF (ESGO) has had a 130% return this year, which is just insane. It shows the geopolitical impact on gold.
Then, as you mentioned, our newest product is Indo-Pacific x China — that includes countries like Japan, Australia, Korea, India, etc. These are, to some extent, the extension of NATO for that region. It obviously buttresses against the geopolitical dominance of China and areas like North Korea.
Certainly, the performance has been insane for some of those countries. I think some Indian stocks are seeing 500% returns over that time. You probably saw over the weekend that Pakistan had a border skirmish with the Taliban, where over 100 soldiers were killed between the two countries.
In that Indo-Pacific region, we are one geopolitical event away from that being probably a couple of billion as well. I somewhat think if I’d been around when the India-Pakistan war had been in place, then it would have seen a big insight from there.
But QUAD is a very exciting ETF and rounds out our defence offering. Funnily enough, we've just added to our tech megatrend product, ITEK, which has eight megatrends, including cloud, social media, and transport. We just included AI, quantum computing, and defence tech in that basket as well.
So you get those eight megatrends all in one go. We think by adding in defence, it's updating that index to represent what's going on. We've got four products in that space today.
We think with gold and defence, you're pretty well hedged against dollar devaluation and geopolitical events, which seem to be the order of the day at the moment.
Proactive: It looks like that may continue to be the case for quite some time. Hector, as always, thank you very much for your time.