Gold – 1, UK Funds – 0

LONDON ( – How quickly time flies! The global financial crisis will mark its 5th birthday in 2012.  And now it’s out of short trousers, let’s see who coped best with the terrible toddler so far, starting with the City of London’s top fund managers…

The UK’s Top Funds vs. Bullion: Annualized Returns in Per Cent1

  1 year 5 years 10 years
Gold2 16.72 26.07 18.18
Silver 1.74 22.44 20.03
Best UK fund sector3 Index-Linked Gilts Greater China Emerging Markets
Best sector’s average 13.4 11.27 15.23
Single best-performing fund4 Henderson

Long-Dated Gilt

Quadris Forestry BlackRock

Gold & General

Best fund’s gain 31.63 17.03 22.38
No. of separate funds

beating gold

38 0 3
1Compound annual growth rate, including dividends and annual charges
2Bullion prices from London Bullion Market Association (16/12/11), storage costs from BullionVault
3Sector data from Investment Management Association (12 months to end-Oct)
4Fund data from MorningStar (UK domiciled, non-institutional, 16/12/11)

Many analysts and advisors will rightly tell you to beware chasing yesterday’s winners. But physical bullion has proven to be uniquely suited to this financial crisis so far.

Over the 5 years to mid-December, gold bullion priced in Sterling returned 218% net of ongoing storage costs. Physical silver rose 175% after storage costs.

The best-performing UK-domiciled fund available to retail investors returned 120% over the same period, including dividends and ongoing fees. Funds in the best-performing sector, Greater China, averaged just over 70% growth.

Those China equity funds cost an average maximum of 4.6% in upfront charges. Buying gold or silver on BullionVault, for example, costs a maximum 0.8% in dealing fees.

So why gold and silver – so far, at least – for UK investors and savers since 2007…? Because they are physical property, rather than anyone else’s financial promise, gold and silver cannot go bust, unlike Britain’s ailing banks or even neighbouring governments across the Channel. Silver and gold bullion are also rare and tightly supplied, unlike the flood of money from the Bank of England, franticly trying to prop up the UK’s banking system.

So despite all the experience and expertise of the UK’s fund management industry, in short, you would have done much better buying silver or gold on the eve of this crisis than entrusting your savings to the City.

U.S. comparison to follow.

Adrian Ash is head of research at BullionVault


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