Title: Why a Value Fund Holds 15% Physical Gold Bullion
Channel: The Acquirers Podcast (Tobias Carlisle's value-investing channel; Acquirers Funds)
Speakers: Guests from a value-fund portfolio-management team (two voices), unnamed in the clip. Context (the fund owns physical gold bullion directly in the fund, vaulted at HSBC in New York; the gold-hedge idea "goes back to Jean-Marie", i.e. Jean-Marie Eveillard) points to the First Eagle Global Value team, but the clip names no one and a web search did not confirm the guests. The interviewer is presumably Tobias Carlisle (not named in the clip). Archived as channel output; the views are the unnamed guests', NOT attributed to Carlisle.
Date: 2026-09-18
URL: https://youtu.be/x4v9elrLQbA
Length: 5:11
Note: YouTube auto-transcript pasted by Stephen; the clip opens mid-sentence (an excerpt of a longer interview). Fillers (um/uh/you know, clears throat) and stutters removed, wording otherwise verbatim. ASR fixes: "rational" -> rationale; "we do on directly" -> we do own directly; "private owner" left as spoken. "The Northstar's really involved creation" is left as spoken; it is probably "the north star is real wealth creation" (flagged, not changed). ">>" marks a change of speaker.
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(00:00) store. So, I mentioned yet again that the Northstar's really involved creation and protecting the downside. And many years ago, this goes back to Jean-Marie, we were thinking about putting a hedge in a portfolio to protect on the downside. And what we converged on is that gold is a pretty good hedge because gold and equities tend to be uncorrelated most of the time.
(00:23) But when something goes really wrong in equities, gold has historically embodied a strong inverse correlation. So, it works as a hedge. Now, we could have used credit default swaps or other derivatives as a hedge, but the problem with that is that you're paying an insurance premium year in, year out for the benefit of the hedge.
(00:40) In gold, we think we get a pretty good potential hedge, but we get paid for holding that hedge over time. And the logic is a bit academic, but the money supply in the developed world as measured in M2 tends to drift upwards by 7 or 8% per year. The gold supply only increases by about 1% per year. The good gold has already been mined.
(01:01) So, in theory, if gold holds its purchasing power in paper money or in fiat money, it should drift upwards by that delta between the 7 or 8% money supply growth versus the 1% gold supply growth. And it has historically obviously maintained its purchasing power. Now, does this really hold? When you go back to when Bretton Woods collapsed in the early '70s until today, gold has compounded in the high single digits.
(01:28) So, that relationship has held. However, it's obviously not a straight line. It's a very volatile relationship. The other aspect we like about the gold is we think it's a great complement to an equity portfolio because again, when you look over the last 60 years, gold and equities got you to a pretty similar place over time, but they got there in very different ways because equities, of course, have very strong elasticity to risk, to confidence.
(01:58) They tend to do very well when people are looking for risk. Gold is again the inverse here. So, gold tends to have its best decades when equities don't do much. Gold did very well in the '70s. Gold did very well in the 2000s. Those were lost decades for equities. So, it adds a great complement to an equity portfolio.
(02:19) So, that's the reasoning. We're not gold bugs. We're not making a call on gold. The gold is there to be a hedge. And then we wondered how should we size it? And what we sort of converged on is if it's less than 5%, it's not going to hedge anything because it's not material. If it's more than 15% of our portfolios, we are gold bugs.
(02:37) We're making a directional bet on gold. That's also not what we're trying to do. So, a nice problem to have we've been facing the last couple of years is because gold has done so well, we've been net sellers of gold because it broke through that 15% upper bound multiple times.
(02:56) And then we trimmed it back down within our target range. >> And the only thing I would add is, and I think what makes us pretty unique, is we actually own the gold bullion directly in our fund. We don't use derivatives, and so if you invest in our fund, you actually own gold bullion in a safe at HSBC in New York.
(03:24) We're probably one of the largest private owners of gold in the US. Obviously far behind the Fed, but we do own it directly and at times we complement it with investment in gold mining or gold royalty companies. We've got a few percent of the portfolio in some of those securities and the rationale behind it is if we can buy gold in the ground at a big discount to gold in the safe, that does make sense.
(03:54) But the vast majority of our gold exposure is via the gold bullion that we own directly. >> Do the miners and the royalty companies count towards your gold allocation, or are they an equity allocation? >> They do. >> Yeah. >> They do. >> So, my understanding is right that you aim for a particular percentage of exposure, but that makes you relatively agnostic to actually the price of gold.
(04:17) It's more just sort of the relative movement of equities versus gold effectively as expressed within the percentage of the portfolio. >> Correct. We do not have an intrinsic value or price target on gold. We just like the gold behavior. >> And on the question of equities versus bullion, the math we basically do is you know how much gold is in the ground, you know how much it costs to get it out.
(04:47) At times, the gold in the ground is a lot cheaper than in the vault. It should always be cheaper because there always should be a risk premium having it in the dirt as opposed to in the vault in the bank. But occasionally, the gold is very cheap in the ground, so we'll have a bit more miners relative to the gold bullion. And at other times, you don't get paid for having the gold in the ground.
(05:06) Then we will heavily skew towards the gold bullion. >> Got it.