With more than $3 trillion of assets invested in 200 funds, the Vanguard Group is the largest mutual fund company in the world. Vanguard Precious Metals and Mining Fund ("VGPMX") is not a pure precious metal fund, as the fund's investment includes basic materials.
The fund seeks capital appreciation by investing in gold-related companies involved in the exploration, mining, processing or exchange of gold. However, this is not a pure gold play, as the fund also seeks out opportunities in other precious metals and minerals, such as silver, platinum and diamonds. The fund's management is focused on companies with strong balance sheets and conservative management, as well as those whose cost of production can withstand declining gold prices down to $1,100. The fund invests primarily in common stocks, but also holds physical gold and silver bullion.
Jamie Horvat took over the fund's management in 2014 from long-time portfolio manager Graham French. Horvat is a portfolio manager with London-based M&G Investment Management, which acts as a subadvisor for the fund. He has focused on the natural resources and mining industries since 2004, when he managed several resource funds for AGF Management. He then managed some portfolios at Sprott Asset Management before joining M&G in 2013. He has a degree in mechanical engineering from Mohawk College. In addition to being a Chartered Financial Analyst charter holder, he is a Licensed International Financial Analyst.
The fund has $3.0 billion in assets under management (AUM) invested in 49 different holdings. Ninety-two percent of its portfolio is allocated to non-U.S. stocks, and 6% is allocated to U.S. stocks. In addition to gold mining companies, the fund invests in silver, copper and iron ore. This diversification across multiple metals provides more portfolio stability. For example, one of the fund’s holdings is BHP Billiton (NYSE: BHP), a diversified base-metals mining company that produces iron ore, copper, and oil and gas. Among the fund's top holdings are Agnico Eagles Mines Ltd. (NYSE: AEM), Nevsun Resources Ltd. (NYSEMKT: NSU), Randgold Resources Ltd. (NASDAQ: GOLD) and Dominion Diamond Corp. (NYSE: DDC).
The Precious Metals and Mining Fund’s Role in a Portfolio
Gold mutual funds like the Precious Metals and Mining Fund can provide an excellent hedge against deteriorating economic and stock market conditions, and they have the potential to outperform the stock market when gold prices are rising. Because they invest heavily in gold producers, the price variability of gold mutual funds can be much wider than the price of gold. However, because this fund is diversified across a wider range of metals producers, its volatility should be less than funds that focus on gold mining stocks.
The Vanguard Precious Metals and Mining Fund is suited to long-term investors who seek a hedge against declining stock prices and can withstand price volatility.