First Eagle Investments , an investment management company in New York City , launched its gold fund in 1993 . It sports an impressive long-term track record , including top-quartile performance in Morningstar ’ s equity precious metals category during every measurable period from one to 15 years ( as of early January ).
Kertsos has been a co-manager of the fund since 2016 . His current partner , Max Belmont , came on board in 2021 . When looking at the fund ’ s performance during Kertsos ’ s tenure , it ’ s clear that he has grabbed the baton from his predecessors and run with it . On an annualized basis the fund has been its category ’ s third best-performing fund during the past five years and the top fund during the past three years .
The Fed The safe-haven angle is a big part of the First Eagle fund ’ s message . But what exactly is a safe-haven investment ? Many people think of it as an asset that provides protection when stuff hits the fan and traditional financial assets — particularly equities — get clobbered .
Another way to frame it is that a safehaven investment should retain its value over time so that it keeps up with inflation and provides ballast that enables investors to add risk to other parts of their portfolio .
Kertsos posits that the past 400 years of financial history has demonstrated gold ’ s ability to maintain its value in real terms during the biggest macroeconomic dislocations . “ Gold has had big pullbacks in real terms , but historically it has shown that it comes back to its average longterm purchasing power .”
“ Safe haven ” sounds soothing and comforting , but sometimes that ’ s not enough to motivate thrill-seeking investors to add gold to their portfolios . That said , those folks might want to reconsider if the Federal Reserve follows through with its announced plans to begin lowering the federal funds target rate later this year .
Manager Thomas Kertsos Age 43
Professional Background He joined First Eagle ’ s Global Value team in April 2014 as a research analyst covering precious metals and marine transportation . In March 2015 he was named an associate portfolio manager of the First Eagle Gold Fund , and in March 2016 he became a portfolio manager of this fund . Before joining the firm , he was an associate analyst covering precious metals and mining in the Global Research Group of Fidelity Management & Research .
Outside Interests He is an avid reader of books on economic history , classics and modern literature . He also enjoys traveling , and occasionally rock climbing and scuba diving .
Manager Max Belmont Age 41
Professional Background He is portfolio manager of First Eagle ’ s gold strategy , as well as a senior research analyst on the Global Value team covering precious metals and aerospace defense . Before joining First Eagle in April 2014 , he was an equities trader at Tradestar Capital . Before that , he was an analyst at U . S . Trust within the investment solutions group . He began his career in the private wealth division of Merrill Lynch in New York where he covered global equities .
Outside Interests He says he ’ s curious about tools and strategies for “ bio-hacks ” such as cold-water therapy , time-restricted eating , breath work and strength training .
That ’ s because Fed rate cuts weaken the dollar and produce lower real interest rates , which pushes up inflation . That ’ s a positive backdrop for gold .
According to Bloomberg data , bull markets in gold occurred after the Fed ended its past three rate hike cycles : Prices jumped 57 % after rate hikes in 2000 , rose 235 % after 2006 and rose 69 % after 2018 .
“ The Fed pivot is key for the structural outlook for the price of gold ,” Kertsos says . Nonetheless , he cautions the Fed could pivot on its pivot and back off from its rate cut plans if inflation re-accelerates or if the economic momentum continues . That could create short-term volatility for gold prices .
Bullion Vs . Miners What differentiates the First Eagle fund from competitors is its concentrated portfolio — it held 19 positions as of November 2023 . “ In general , competing funds often hold 50 to 60 securities ,” Kertsos says .
The fund also differs from many of its competitors by holding a significant stake in physical gold . The top 10 holdings in a number of its top rivals are stocked with miners and don ’ t include bullion among their largest positions .
At the end of November , gold bullion was the First Eagle fund ’ s largest holding at 15 % of its portfolio . “ Traditionally , bullion has been between 15 % and 23 %. It ’ s now at the low end because we ’ re finding good valuations in specific miners ,” Kertsos says .
The price movements of gold bullion and miner stocks aren ’ t always in sync . For starters , gold mining stocks are more correlated to the public market , which can either hurt or help their valuations . Moreover , the management teams , cost structures and mine quality can differ greatly among mining companies , as can the logistical challenges of mining in different areas .
“ No two mines are alike in terms of the geological setting , plus the management teams and the balance sheet of the business and so forth ,” says Max Belmont . “ With miners there ’ s a huge dispersion in terms of quality , asset base and potential
46 | FINANCIAL ADVISOR MAGAZINE | JANUARY / FEBRUARY 2024 WWW . FA-MAG . COM