VanEck International Investors Gold Fund: Question & Answer

Gold is one of the most vital metals in the world and a unique asset, with the ability to enhance portfolio diversification, act as store of value, and hedges against systemic risk. VanEck has long been considered a leader in gold-related investments and has been managing gold funds since 1968, including the nation’s first open-ended gold equity mutual fund. This blog intends to answer frequently asked questions about investing in gold mining companies, and more specifically, the VanEck International Investors Gold Fund (INIVX).

• Why invest in gold?
• How do you invest in gold?
• Why invest in gold miners?
• Are all gold mining companies the same?
• Who are the members of the Investment Team for the VanEck International Investors Gold Fund?
• How do you decide which gold companies to invest in?
• How can investors buy VanEck Mutual Funds?

Why invest in gold?

Gold has staying power, with a history in the international monetary system spanning over 2,500 years. For centuries, gold has served as a form of exchange, a safe haven investment (in times of financial market turmoil) as well as a hedge against severe inflation.

How do you invest in gold?

Primary ways to invest in gold are via physical bars, coins or jewelry, gold certificates, gold-backed exchange-traded products, or through shares in gold mining stocks (or gold miners).

Why invest in gold miners?

An investment in gold miners offers several benefits beyond that of other gold-related investments.

• Leverage to gold prices – For most gold miners, profitability is measured by the average cost of production relative to the current price of gold. High or rising gold prices can thus magnify profits earned by gold miners, which often translates to higher share prices.
• Yield opportunity – Investors are often being “paid” to own gold mining stocks, with many gold companies opting to return capital to shareholders in the form of dividends. On the other hand, investors in physical gold often have to pay for ownership (in the form of storage).
• Idiosyncratic return drivers – Performance of gold miners is not wholly dependent on the price of gold. Over time, gold miners may exploit efficiency gains from new technologies, capitalize on exploration success or else become the target of a larger acquisition. All of these factors may influence their return prospects regardless of gold prices.

Are all gold mining companies the same?

No, not all gold mining companies are the same. The gold mining industry can be segmented in various ways. One way is based on the primary business activity of the gold miner. For example, many gold miners are involved in the exploration of quality mine sites as well as development of preliminary mine operations. However, other gold miners may rely on acquisitions to build gold reserves or act as a project financier for several gold mining projects.

Another way gold miners are often segmented is based on their overall mine operation size and gold production levels:

• Juniors – This segment is represented by early-stage explorers and developers with, generally, very little production. While many of these companies demonstrate a high risk of failure, they also offer tremendous upside as targets for acquisition by larger miners.
• Mid-Tiers – A mix of companies with sizable and diversified gold production, substantial growth potential, and smaller market capitalization. They tend to exhibit less risk than their exploration peers.
• Majors – Tend to be less volatile, more mature mining companies, with larger portfolios than their smaller peers. These are well-capitalized companies with decades of history and world-spanning operations.

Who are the members of the Investment Team for the VanEck International Investors Gold Fund?

Effective May 1, 2023, Joe Foster will be stepping back from his current role as Portfolio Manager for the Fund, and Imaru Casanova, the Fund’s current Deputy Portfolio Manager, will be taking over as Portfolio Manager. Mr. Foster will remain on the Investment Team as Gold Strategist. Adam Graf is a Senior Analyst on the Fund.

The Investment Team reflects the approach initiated by VanEck founder John van Eck at the Fund’s launch of including geologists and people with on-the-ground experience to provide unique, differentiated perspectives on company operations and forecasts.

For more details about the transition and the Investment Team, read our Gold Portfolio Manager Transition Plans FAQ.

How do you decide which gold companies to invest in?

The Fund’s investment methodology pairs top-down, macroeconomic assessment of gold bullion markets with bottom-up, fundamental company research.

• Top-Down – Macroeconomic analysis of systemic financial risks, inflation, monetary policy, interest rates, currencies, debt levels and physical supply (among other factors) help the Investment Team identify gold price trends over the medium- to longer-term. A positive or bullish gold price outlook favors overweight allocation to high-cost producers and junior miners while a negative or bearish gold price outlook favors overweight allocation to low-cost producers, senior gold miners, royalty companies and gold bullion. These are well-capitalized companies with decades of history and world-spanning operations.
• Bottom-Up – Fundamental security research relies on company analysis, comprehensive modeling and qualitative research. Company analysis takes into consideration factors such as management expertise, reserve location, geopolitics, deposit types, drill results, mine engineering and labor issues. Modeling entails forecasting mine production, sustaining costs, reserves, capital structure, and cash flow, as well as gauging absolute and relative valuations. Qualitative research includes mine site visits and meetings with company management to evaluate project execution, site accessibility, health and safety measures as well as environmental impact.

Combining these elements, the Investment Team is able to narrow the field of approximately 400 gold companies to portfolio of around 45-65 companies (ideally, those with the greatest unrealized value potential). Though long-term conviction often has the greatest influence over sizing of individual position within the portfolio, the Investment Team adjusts its portfolio weightings according to changes to their gold price outlook.

How can investors buy VanEck Mutual Funds?

Learn more here.

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