FX.co ★ DSM makes 5% investment in gold

Dutch pension fund DSM allocated 5% of its portfolio to gold.

Obviously, the yellow metal remains an attractive asset to investors looking for options in a world that is flooded by negative-yielding bonds.

Local reports say DSM started its positions in precious metals back in October 2020, following an asset and liability management (ALM) study. Back then, the company cut its bond positions by 10%, investing half of the proceeds in gold. It divided the rest between stocks, real estate and infrastructure.

DSM said the study showed that adding gold to their assets is advantageous because of diversification benefits. The expected profitability did not fall, but the risk decreased.

And in April, the pension fund bought additional gold, investing about 5% of its portfolio. This is about € 386 million, as the fund has assets worth € 7.7 billion.

Gold has been rallying since the beginning of April.

DSM has joined several other pension funds that have been looking at gold to balance risks in their portfolio.

Although their number is little, the World Gold Council said interest is certainly growing.

In fact, in a WGC survey released on May 4, roughly 30% of UK pension funds said they are looking to increase their portfolio in gold. Their reason is that they want to reduce risks on long-term liabilities, all while increasing profitability.

Gold has long proved that it is effective in such situations, but its distribution is still relatively small compared to other assets.

Meanwhile, 60% of portfolios surveyed said they would increase access to infrastructure, while 40% said they would increase their positions on private equity.