Portfolio Manager Perspectives

Jeff Benjamin

Gold fever won't break anytime soon, says fund manager

Team Asset Strategy's Dailey says falling currencies will continue to boost price of precious metal

Oct 13, 2010 @ 12:42 pm

By Jeff Benjamin

While the short-term outlook for gold at current levels might be unclear, the long-term bull market for the precious metal will continue, according to James Dailey, manager of the Team Asset Strategy Fund Ticker:(TEAMX).

“The question is not how high can gold go, but how low can currencies go,” he said. “Right now, most of Europe, the United States and Japan have inherent debt problems that they can't pay back, so they have to devalue their paper currency.”

Support for that thesis, he said, is already showing up in the form of increased gold ownership by institutional investors and central banks.

The retail investor is only starting to get on board the gold bandwagon, Mr. Dailey said.

The outlook for many developed markets, according to Mr. Dailey's quantitative analysis, is for a period comparable to the stagflation period in Latin America during much of the 1980s and 1990s.

“Economic activity is poor and currencies continue going down, which bodes well for gold,” he said. “More and more, people will recognize that they shouldn't be holding cash, they should be holding tangible assets.”

Mr. Dailey manages the fund as an absolute-return global macro strategy that will go anywhere in the world and anywhere on the corporate balance sheet.

The portfolio is both very concentrated in about 30 stocks and very active, with an annual turnover rate that could be as high as 800%.

The outlook for gold is part of a broader commodities theme that has more than half the portfolio exposed to commodities, either directly or indirectly through equity positions.

“Our basis premise is that since 2001 we've been experiencing a secular bear market in stocks and a global bull market in commodities,” he said.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.

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