George Soros bets big on gold — but advisers have a smarter play

George Soros bets big on gold — but advisers have a smarter play
Billionaire buying up shares in SPDR Gold Trust; iShares' version cheaper, though
JUN 25, 2012
Billionaire investors George Soros and John Paulson generally are considered to be pretty smart guys. But it turns but there's a smarter way for advisers to invest in gold than the way the big boys are doing it. In separate filings yesterday, the two men revealed a fondness for the precious metal and a particular way of investing in it. Mr. Soros increased Soros Fund Management LLC's holdings of the SPDR Gold Trust Ticker:(GLD) to 319,550 shares as of the end of March, up substantially from 85,450 shares at the end of the fourth quarter. Mr. Paulson's hedge fund Paulson & Co. Inc. held 17.3 million shares of SPDR Gold Trust, the same amount as of the end of the fourth quarter. It's not surprising that both men are turning to the $63 billion SPDR Gold Trust. It's the largest gold ETF and has the most trading volume. Thus it's easier for investors with large positions — such as hedge fund managers — to get in and out without big transaction costs. But for nonbillionaire investors who aren't going to make market-moving purchases, bigger doesn't always mean better. The SPDR Gold Trust, which holds gold bullion it stores in a vault, charges investors an expense ratio of 0.4%. The $9 billion iShares Gold Trust Ticker:(IAU) functions in exactly the same way, except it charges only 0.25%. The difference in expense ratios equates to savings of $150 annually on a $10,000 investment in gold. iShares used to charge the same 0.4% expense ratio but cut it in July 2010. Since then, the two ETFs have moved in virtual lock step. SPDR's ETF has a return of 27.19%; the iShares ETF has a return of 27.5%. The only difference in performance has been the expense ratio.

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