“In the past, people would buy gold equities,” he said. “Buying physical gold, you had to use futures or you had to store it. Now, you can get the pure physical gold exposure for 40 basis points.”
‘Strategic Investment’
A year after starting ZGLD, the bank created ETFs holding physical silver, platinum and palladium. It hasn’t launched a new ETF since - choosing instead to capitalize on its strong position in a part of the market highly valued by Swiss fund buyers.
“Investors look at precious metals as a strategic investment,” Nicoli said. “They don’t go in and out.”
Zuercher, an early provider of mortgages to Zurich’s citizens, is well-known in Switzerland for overseeing precious metals vaults. This helped their brand in the eyes of gold bugs and precious metals investors looking for physical commodity funds.
“The reasons to hold the ZKB ETF are quite simple,” said Herwig Weise, a portfolio manager at Mack & Weise GmbH, who owns the firm’s gold and silver funds. “Physical allocation of precious metals and quotation in Swiss francs.”
Zuercher’s success over the past 10 years has followed the growth of the European ETF market. In 2006, when ZGLD started trading, European ETFs held around 80 billion euros ($92.2 billion), but by the end of 2016 that figure was 550 billion euros, according to Morningstar data. By 2020, assets are expected to reach one trillion euros, the data show.
Need To Differentiate
That’s made firms keen to get in on the action, creating a relatively crowded marketplace. Last year, for the first time, the number of ETFs closed or delisted in Europe broadly matched the number that were started, according to a February report from Morningstar.
So fund providers need to differentiate themselves.