Pension
Funds to Buy Gold as Insurance, McGuire Says (Update2) By Kim
Kyoungwha - Last Updated: October 23, 2009 05:14 EDT - Bloomberg.com
Oct.
23 (Bloomberg) -- Pension funds will increase gold holdings
to acquire “financial insurance,” pushing prices higher as
currencies drop, according to Shayne McGuire, director of
global research at the Teacher Retirement System of Texas.
“I think the largest institutions like our own are realizing
that we barely own any,” McGuire said in an interview in Hong
Kong. “The same thing applies to most of the pension funds
which manage trillions of dollars in world wealth.”
Record government debt and interest rates close to zero percent
are pushing gold higher for a ninth straight year as investors
seek to protect their wealth against the prospect of rising
inflation and currency debasement. Teacher Retirement, backed
by $95 billion in assets, has launched its first internally
managed gold fund, worth $250 million, invested in precious
metals, mining stocks and exchange-traded funds. McGuire is
the portfolio manager of this new fund.
The fund is “a reflection of our interest in gold,” said
McGuire, the author of “Buy Gold Now” published in March 2008
that correctly predicted the metal will rally. “That’s mostly
because of diversification” that benefits our overall portfolio.
Gold represents only 0.4 percent of total global financial
assets valued at around $200 trillion in 2007, McGuire said,
adding the future focus for the metal was investment demand.
“The interest in the gold sector continues to be strong,”
said Stephen Goodman, investment banker with New York-based
Casimir Capital L.P. “We are pleased to connect a growing
number of institutional investors globally with opportunities.”
Losses, Writedowns
Gold for immediate delivery climbed to a record $1,070.80
an ounce on Oct. 14 and traded at $1,059.25 at 4:42 p.m. in
Singapore. It has risen 47 percent in the past year. Gold
for December delivery in New York traded at $1,059.70. McGuire
said it’s “difficult to estimate how quickly it will rise,”
and saw “significant upside” in the next two to three years.
The U.S. Dollar Index, which measures the currency against
those of six major trading partners, has fallen 7.5 percent
this year as President Barack Obama increased the nation’s
marketable debt 22 percent to $7.01 trillion to revive growth.
Financial institutions worldwide have reported credit losses
and writedowns of about $1.62 trillion since the start of
2007, when the credit crisis began. Group of 20 governments
have pledged about $11.9 trillion to ease credit and revive
economic growth, according to the International Monetary Fund.
‘Financial Insurance’
“I don’t think the question really is what is gold worth
but what are currencies not worth,” McGuire, 43, said yesterday.
“Consider the tremendous fiscal excess that major governments
have made to prevent the world economy from collapsing,” he
said. Owning gold today is “financial insurance,” he said.
McGuire, with 15 years of international financial experience,
has worked for the seventh-largest pension fund in the U.S.
since 2001. He had managed a $2 billion European equity portfolio
and was ranked among the best Latin American analysts by Institutional
Investor in 1995 and 1996, he said.
Teacher Retirement has nearly 1.3 million public education
and higher education employees and retirees participating
in the system, according to its Web site.