Investing in Precious Metals: Time to Add Some Shine to HNWI Portfolios

David Mitchell, Founder and Managing Partner of Indigo Precious Metals and business associate Shiv Tulsiani, Key Accounts Executive at metals logistics firm Malca Amit, double-teamed for an insightful Workshop on physical gold, active management of precious metals portfolios, and the critical logistics of storing and moving items of great value.

Shiv Tulsiani opened the proceedings by explaining that his role in providing precious metals logistics means moving gold or other highly valuable items across borders safely and then storing them in places such as Singapore, Hong Kong or Zurich. “We are headquartered in Hong Kong, but we operate globally of course,” he reported.

He told delegates that he is a logistics expert, not a markets expert, so his mission in the Workshop was to highlight the firm’s vault, which he explained is a more personalised storage solution.

“But what I will say is that these precious metals, gold, silver, palladium, platinum, these are safe-haven assets,” he stated. “Accordingly, a part of your HNW client portfolios should be allocated to them, as they are a natural hedge against the capital markets, and they give you a sense of wealth preservation as well.”

Malca Amit is not a trading company, it is purely a logistics company. In the storage space, for example, the firm might work with large banks working, and operate the big vaults for them. And Malca Amit also has many individual clients, investors that have safe deposit boxes. Additionally, the company works, for example, with numerous retailers, wholesalers, and others to store and ship, the company provides liability coverage, the whole array of logistics services.

Malca Amit clients might own anything from diamonds, jewellery, to art, or precious metals - basically anything that has a price tag. The company prides itself on providing peace of mind for clients. The assets handled are immensely valuable, sometimes sentimentally precious as well as in monetary value. “Clients need the firm to keep the assets for them, to move them and to preserve them, which is why their business is so neatly affiliated with the world of wealth management.

Malca Amit offers a global team of experts, including logistics, security, customs house and special operations professionals. The company provides a smooth, expedient and professional service tailored to precise specifications and needs for the expert, efficient, secure movement of their highly valuable assets.

The company has offices and affiliates around the world and states on its website that it is committed to an “unsurpassed level of excellence” in customer service and reports that the assets for which the company is best-known include diamonds and jewellery, watches, precious metals, fine art.

Malca Amit’s high security strategically located storage facilities are recognised as market leaders, Tulsiani reported. Numerous facilities are located in free trade zones, and others are strategically positioned around the globe in locations including Bangkok, Hong Kong, London, New York, Shanghai, Singapore, Toronto and Zurich.

For the wealth management community, this is a vital element in the big picture of their assets and wealth preservation. The company can collect assets from anywhere and deliver to anywhere. And liability coverage is of course, essential. Notably, a safe deposit box in the banks will not be covered for the loss or damage of the goods, but Malca Amit does itself arrange the cover for the precious items they handle, and the firm is outside the banking system.

Tulsiani explained that Malca Amit was formed in 1963 by two families that are still in the business today. The company began by shipping diamonds from Tel Aviv to Hong Kong, and the company today boasts a presence in 45 countries through 70 offices. While the company was originally Israel-based the holding-company moved to Hong Kong around 15 years ago. Malca Amit employs about 1800 people globally and the company remains privately held to this day.

The story of Malca Amit, in fact, tracks globalisation and the dramatic increase in private wealth worldwide in the past 50 or more years. In 1963, Raphael Amit established a small office in Tel Aviv, Israel, providing typing services for export papers. At the time, valuables exported from Israel were simply sent by regular mail accompanied by export documents.

The office was run by his wife, Rachel Amit, and her sister, Malca Tykocinski. When the diamond business moved from Tel Aviv and made its home in Ramat-Gan, the office began shipping valuable airfreight shipments. That was the company’s first step into the world of international freight forwarding.

In 1979, the Israeli government prohibited diamond shipments via mail because many diamonds were disappearing in transit. Amit, along with his wife and sister-in-law, formally defined Malca Amit as a shipping company and opened the first Malca Amit office outside Israel in Hong Kong. They began shipping diamonds and other valuables in a safe and secure manner. The company’s rapid international growth ensued.

Offices were opened one after the other as the demand for secure, professional and expedient logistical solutions grew in tandem with the growing scope of the international diamond, jewellery, and precious cargo industries. New York, Antwerp, Los Angeles, and London soon saw the opening of new Malca Amit offices. Today, the company’s network spans the globe.

“We are in a highly sensitive market and we are obviously regulated, we are held accountable,” Tulsiani explained. “The governing body is LBMA (the London Bullion Market Association) and we abide by their strict regulations in everything that we do, in our operation, with regards to storage and moving. We are an accredited vaulting service and we deal with accredited billion banks, with bullion traders that also abide by the LBMA rules and regulations. We provide 100% liability coverage for all your goods.”

Enhancing value via active diversification actually within precious metal

With that he handed the floor to a friend of the company, David Mitchell, who he explained has been in the investment banking industry for over 30 years and who some years ago established his own bullion trading company, Indigo Precious Metals, headquartered in Singapore.

“For some 30 years,” began Mitchell, “My career has encompassed senior roles as a financial markets trader at leading banks such as HSBC, Rothschild, Bank of America, and others. I have a long association with gold and indeed today am also a director of Baird & Co, the largest gold refinery in the UK. My main objective is advising and facilitating portfolio diversification into precious metals for my clients. Today, I want to talk briefly about the importance of precious metal portfolio diversification, active portfolio diversification versus inactive or static metal holdings.”

He reported that his own research and analysis points to a substantial continued upward revaluation of precious metals. “It is also my opinion that we are very early in this particular wave cycle,” he stated, “so we anticipate less risk and superior returns. What is really important for HNWI clients is they are active in the space rather than being inactive and static. Clients who simply wish to invest and hold either gold or silver are missing out on huge opportunities within the precious metals, such as the platinum group metals.”

He noted Ray Dalio’s comments on knowledge. “Dalio reported his view that knowing how to deal well with what you don’t know about is actually much more important than knowing how to handle anything you do know a lot about. So, diversifying is one of the most important things we need to do in order to invest well.”

He observed that markets generally lack the knowledge of the unique long-term cycles, multiple pricing ratios, supply and demand dynamics, mine developments, the cost of production of certain metals, and also distinct trading patterns that can be recognised when analysing long term charting. “But,” he explained, “we at IPM and Auctus Metal Portfolios use artificial intelligence to identify trends as they begin to emerge.”

He then highlighted a slide that showed how gold itself over 20 years to end 2018 had performed at 7.75% per annum, better even than the remarkable 7.65% per annum achieved in the same time by Warren Buffet in his Berkshire Hathaway stock price.

Mitchell then mined down into actively managed metal portfolios versus static gold holdings, showing the audience how since early 2016 these had far outperformed gold or Berkshire Hathaway.

He said the performance was dramatically enhanced by models that analyse 55 input variables and historical data. “We take the classic asset diversification managed model which is religiously followed by the most successful asset managers and incorporate the same principles and apply them to physical precious metals,” he reported. “Our AI system effectively recognises price anomalies between the classic five investment metals being sold, gold, silver, platinum, palladium and rhodium and reweighs and rebalances our clients’ physical portfolios when our algorithms trigger trade instructions. On average we have historically rebalanced clients’ physical portfolios four to five times a year, although in some years that could just be once, and in other years up to six or seven times.”

He explained that the results are outstanding, pointing to the Auctus Metals Portfolios ‘Provectus’ Models 1 and 2 having surged more than +36% and +52% in actual performance per annum for each of the two years 2017 and 2018, while 2019 is up +45% after fees. He also extrapolated that on the same active management protocol using audited retrospective analysis, they would be each up around +20% compound annual growth a year for the past 20 years on the same basis, had they been in existence since then.  

“We have gone to great lengths to thoroughly back-test the results,” he stated. “In 2019 year to date, performance has also been excellent with the actively managed portfolio 2 up over +45% while gold itself is up only +17% since January 1st.”

Mitchell also highlighted the firm’s storage facility within the Freeport free trade zone in Singapore, where transactions - buying or selling - are exempt from any levies, and where the identity of the beneficial owner is not disclosed.

“To summarise,” he concluded, “we offer a unique solution. The clients hold their physical metals within their private storage with our vaulting custodian Malca Amit with full associated ownership, in their own fully allocated, segregated family name. Clients always have complete visibility with their metals, valuations, insurance, and independently auditing. The overall returns of our clients inclusive of all costs far exceeds a static metal holding.”