Gold’s Revival Gives Life to Market-Beating S. African Fund

  • South Africa’s only gold mutual fund returns 110% this year
  • Old Mutual manager Pick turned hobby into career after her MBA

Old Mutual Plc money manager Meryl Pick has a fitting background in chemical engineering for the modern alchemy of transforming South Africa’s only remaining gold fund into the continent’s top performer.

Pick’s Old Mutual Gold Fund has gained 110 percent this year, beating the average 2.6 percent across South African investments tracked by Bloomberg. The 32-year-old is being aided by a world-beating rally in the country’s gold mining stocks, which have been given a new lease on life by bullion prices that have jumped by a third in rand terms since she started running the 606 million-rand ($45 million) fund at the beginning of 2015.

“It’s one of those commodities that does nothing for ages and then does 100 percent,” she said by phone from Cape Town. “You can make a lot of money in a short space of time. But you can’t ever get too comfortable.”

The six-member FTSE/JSE Africa Gold Index has surged the most on record over the past 12 months as easy monetary policy and events like the U.S. presidential election campaign and Britain’s looming exit from the European Union drive demand for havens. That’s marking a change for producers in South Africa, where a year ago mines were bleeding cash, hurt by labor protests, sliding output and the rising costs of working the world’s deepest and most dangerous mines.

‘Depressing Space’

“I started covering gold shares in 2013 and it was quite a depressing space with the price being where it was and many predictions were that it would be falling below $1,000,” Pick said. “It is great to actually see that turn around.”

Pick, a former Unilever Plc engineer, began trading stocks as a hobby while doing her Master of Business Administration at the University of Cape Town before joining Old Mutual Investment Group in February 2012 as an analyst. Once appointed to run the fund, she expanded its mandate to include gold shares outside of South Africa.

For now, it is the local miners that have been driving returns for the fund, and helping to reverse losses posted in 2015, 2013 and 2012. The spot price for the metal has gained 26 percent this year, and reached a two-year high of $1,375 an ounce on July 6. The rand weakened 0.5 percent to 13.5896 per dollar as of 4:41 p.m. in Johannesburg on Monday.

For a QuickTake on gold’s price performance, click here.

The shares of Sibanye Gold Ltd. which made up 13 percent of the fund at the end of June, more than quadrupled over the past year. That’s the biggest increase among 24 of the world’s biggest gold companies. Johannesburg-based Harmony Gold Mining Co., which is the next best performer, has surged 341 percent and is not among Pick’s top 10 holdings. Her fund underperformed the FTSE/JSE Africa Gold Index, which gained 150 percent this year.

‘Testy’ Market

Randgold Resources Ltd., which has more than doubled in value over the past 12 months, is her biggest foreign holding, comprising 10 percent of the fund. It has also been boosted by rallies in Barrick Gold Corp., New Mining Corp. and AngloGold, its biggest investment, comprising more than a quarter of its holdings.

The longer-term outlook for gold is being supported by China and Russia’s decisions to keep stockpiling the metal and consumer demand from India, Pick said, although a potential U.S. interest-rate increase could make the market “testy.”

“We’ve got at least one Fed hike likely this year,” she said. “That could put the gold price under pressure for the remainder of the year.”

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