Riding the Global Wave of Demand for Gold and Other Precious Metals
Nicolas Mathier is Managing Partner of Singapore-based Global Precious Metals, which is a riding a wave of global demand for physical gold and other precious metals. Along with colleague Heena Mayani, Head of Client Relations for APAC, they met with Hubbis to explain why Asia’s wealthy investors should hold more physical gold to help preserve wealth and to hedge against global uncertainties. And they explain how they are increasingly working with wealth management intermediaries and other professionals to help expand the firm’s reach across the region, into Europe and further afield.
Mathier begins the discussion by explaining that the typical Global Precious Metals (GPM) client is both Asian and very wealthy or perhaps is based in Europe and seeking to transact or store precious metals through Singapore and broader Asia.
“We offer buyers access to the accredited London Bullion Market Association market, thereby helping them buy gold bars, silver bars, platinum bars, or even palladium coins directly through the refineries. We then offer to locate the storage for them, so the client can choose the location and type of storage that he or she wants. They then have direct access to their holdings, which are held outside the banking system, and therefore with zero counterparty risk.”
Cutting risk, storing value
Mathier explains that the lack of counterparty risk and the minimal exposure to the volatilities of the global financial system are both vital to the whole premise of investing in such assets. In short, if the world economy is highly stressed or if there are global geopolitical crises, gold will shine even brighter as a store of value and as a protector of wealth.
“When mainstream financial markets are very volatile,” he notes, “gold, as a non-correlated asset, gives investors some considerable degree of safety within their portfolio that they would not obtain from any other asset class.”
Paper can burn, gold cannot
He explains that gold can, for example, also be held as a ‘paper’ asset through funds such as ETFs, which are easily tradable financial securities. However, although backed by physical gold, it is not segregated, so gold bars, for example, of 400 ounces each might have many owners – for example, perhaps 30-100 separate owners – meaning that to take delivery of that underlying gold would be extremely problematic in times of crisis. Some banks, he says, also offer some gold funds backed with physical gold, but it still remains a financial product within the financial system.
“It really depends what the client wants to do,” his colleague Heena Mayani elucidates. “If they want to have simply exposure to gold because they believe that in the next few months it will increase in value, they might choose paper gold in some form. Paper gold, such as ETFs, are more suited to trading short-term price movements and short-term volatility. But as I explained, at times of major global or local financial sector distress, paper gold can become exposed to counterparty risks in the financial system, and physical delivery might then be virtually impossible.”
Accordingly, if the investor wants a long-term store of value, for wealth protection, and a hedge against uncertainty, it is better to own the physical asset. “For the very wealthy investors we deal with, we firmly believe they should hold physical gold as a long-term diversified element of their portfolios,” Mathier concludes.
Mayani elaborates, noting that the firm’s wealthy and ultra-wealthy clients like the fact that precious metals are fully segregated, that they have distinct and full legal ownership, so they are devoid of systemic financial sector risk.
“And gold is a very liquid asset,” she comments. “Bullion can be traded very rapidly in large volumes; up to tens of millions of dollars. Having a hard asset which is highly liquid, one that has stood the test of time over centuries, and that is accessible 24 hours a day is of great appeal to HNW clients.”
Away from the regulators
They also note that a great appeal of physical gold is that it is outside the global regulatory proliferation that has been spilling out incessantly across the globe in recent years.
Gold is a commodity and therefore a very confidential asset, with no formal financial sector reporting required, and there are many benefits to being outside the global financial system, away from potential government confiscation, away from the control of anyone other than the owners themselves.
Mayani also explains that bullion storage is available in professional freeport facilities, for example, in Singapore or Hong Kong, or perhaps in dedicated facilities across major cities in Switzerland.
Mathier adds that for the investor with perhaps only one or two bars of gold, they might prefer to hold that in a safe at home, or, better, in GPM’s private safe deposit boxes, where it is cost-effective to store anywhere between 25 to 200 kilos of gold. “Clients are then given a regular inventory statement and audits,” he reports.
They note that there has been no tangible evidence of investors shunning Hong Kong as a result of the ongoing problems there. While they do not see people shifting gold holdings out of Hong Kong, they do see those investors buying new gold holdings tending to prefer Singapore or Switzerland.
The choice is yours…
They both delve into more detail on the choice of location for storage. “For example,” Mathier elucidates, “we might work with European families who want their gold outside of Europe so that in the event of some global or local calamity they have the ultimate currency outside the banking system and away from their home markets. On the other hand, many investors from Asia or Europe also like the security of Switzerland.”
Mayani explains that GPM works with very reputable global logistics companies and refineries that have been in the business for more than 50 years.
“Wealthy investors must be aware that there are considerable risks of venturing outside the reputable larger firms such as ours to buy bullion,” she comments. “We assure the investors that we buy the physical gold straight from the refineries, the bars are then produced in Switzerland and shipped to the storage location, for example, Singapore, Hong Kong, Switzerland, or in other secure locations. We provide a turnkey service for the clients that includes all insurance and logistics. The client can view the gold in any place they choose to store it, and most importantly, they have legal title to it.”
How much is enough?
Mathier maintains that high-net-worth investors (HNWIs) should hold between 3% and 5% of their investment portfolios in gold as a core holding and advises that they might rise to between 5% and 15% for any serious wealthy investor at times of financial stress.
“The typical client we work with will be able to buy upwards of USD500,000 of gold,” he reports, “as this size relates to the order size the firm needs to lodge to work directly with the refineries who supply GPM with the bullion. Generally, the investors we deal with will be taking exposure with GPM in physical gold in the region of USD1.5 - USD2.5 million. That might represent perhaps 10% of their investment assets, so these are clearly wealthy individuals and clearly very intent on wealth preservation.”
A key mission for the firm is to further build its client base around the region. “To identify our clients,” Mathier explains, “we work closely with financial intermediaries, law firms, trustees, and others. Although we are based in Singapore, we offer our services to investors in Europe and elsewhere; they appreciate our presence here and the robust regulatory environment and the strong levels of ancillary services.”
He adds that GPM has a sensible fee arrangement protocol to ensure that there is a fair economic exchange with those firms GPM works with. “We have established and fair fee-sharing agreements with lawyers, trustees, with other institutions, external asset managers and so forth,” he reports.
They prefer not to make projections on the price of gold, although they do note that gold is obviously affected by world events, such as the recent US-Iran troubles. “We do not see gold dropping below USD1,500 an ounce this year,” Mathier comments, “so that is probably the new base, but we do not like to make projections on the upside potential. Clearly, the price will be significantly impacted by any major events, whether military conflict, the US-China trade wars, or other events.”
They close the discussion by reiterating the view that major global financial or other problems are never far away, and that the financial system remains inherently precarious. “HNW investors should always hold physical gold,” Mayani concludes; “gold is a store of value, it cannot be taken away from the investors, and the gold market is very liquid, highly secure and very private.”
GPM’s key priorities for 2020
Mathier explains that GPM is in the process of evolving its internal systems, including upgrading the whole enterprise resource planning trading system. “By Q2 of this year, we will be able to offer to third parties, anyone operating here as licensed capital markets service firms, access to our platform, so they are able to trade gold directly with us electronically, without going through the old-fashioned ways of using the phone and email. That is certainly a key priority.”
“To clarify further,” he adds, “this is all about achieving a more organised internal system, a more self-sufficient company. That will help me step back somewhat to focus my energies on marketing and clients, rather than managing the office. We are, therefore, hiring more people and loading up their responsibilities. We will be 14-strong by the end of this Q1 of 2020; that is quite a reasonable size for a trading firm.”
GPM does not, however, thus far work with the private banks, but that might change. “They have tended to see us as the catalyst for assets under management leaving them,” says Mathier. “But what we are now looking at rolling out in 2020 is to offer our services white labelled to institutions, for example to small private banks, so that instead of them hiring several traders to offer that service, they can leverage our platform and backend and do it themselves through us.”
Mathier and Mayani are also intent on spreading the word to new clients in a wider variety of markets. “To help achieve that,” Mathier reports, “we are aiming to create more partnerships around the region, so that is a new mission for us. We cannot be everywhere in the world, so if we want to find some clients that are based in Thailand, for example, it will be valuable to forge a partnership with a local company, or with local people as introducers who will access the right investors.”
Getting Personal with Nicolas Mathier
Mathier was born in Geneva, from where his family soon moved to the small village of Le Vaud, which even today boasts a population of only about 1,300, all of whom are far outnumbered by the local cows. He later moved back to Geneva for high school and then took up an apprenticeship for four years, working three days a week for Lombard Odier and studying two days a week.
“The internship was an excellent alternative to university, and within a few years I got to know the workings of the bank and learned a lot about wealth management,” he says. “I quickly gained a strong global view of how a company works and of the bank, which later on made it easier for me to set up Global Precious Metals when the right time came.”
He then worked in trading for Lombard Odier for roughly 18 months before taking up a role with a Swiss family office in Singapore in 2008.
“The firm,” he explains, “was named Swiss Heritage and we had four clients and roughly USD2.2 billion under management. Then came the global financial crisis and these families became extremely concerned about where to put their money, due to the counterparty risks, with financial firms failing or weakening around the globe. That was when I started to help them buy physical gold outside the banking system and helping them store it, and that was the genesis of Global Precious Metals, which we then created.”
Mathier’s wife is Sri Lankan, and they have two children, one of three years old and the second of less than 12 months old. “Singapore is our home now,” he explains, “it is where I have my business, where our children were born, and where we see ourselves as settled for the long term. I will apply for permanent residence this year; actually, this is something I should have done before but have been so busy building the business. As my wife is from Asia, she feels very comfortable here, although she did enjoy living in Europe before.”
Mathier still has a great love for the mountains, and in the past became qualified as both a ski and a snowboard instructor. His favourite spot in the Swiss alps in Champéry, a small and charming resort to the east of the larger Morzine resort and to the north of the world-renowned Chamonix, which first hosted the winter Olympics in 1924.
“I have memories of great times with friends and family during my childhood skiing there,” he says, “so the place is full of stories for me.”
His less active leisure time is spent enjoying music – especially pop and techno – and even singing along. “It is a bit embarrassing perhaps,” he quips jovially, “but I must admit to liking singers such as Selena Gomez, and my favourite currently is actually Ariana Grande!”
Getting Personal with Heena Mayani
Heena Mayani is GPM’s head of client relations for APAC. She hails from Bangkok, where she attended the British International School before moving to the UK to study law and business. Her first job was with the regional Southeast Asia law firm of Tilleke & Gibbins in Bangkok, and she then completed her post-graduate studies in law at Hong Kong University.
Married, but as yet still enjoying the freedom of a successful career without children, Mayani loves her life in Singapore, from where she can easily visit family and friends in Thailand. Her family still run an import/export business there, as they have done for the past forty years. A keen pastime for her is also art, both creating and admiring.
Global Precious Metals Offers Asia’s HNWIs a World of Opportunity
‘Gold is money. Everything else is credit.’ That is the quote attributed to J.P. Morgan himself back in 1912, and that headlines the Global Precious Metals (GPM) brochure on the firm and its services.
The literature then explains that GPM is strategically positioned in Singapore for wealthy clients, with access to a global network of the world’s largest gold and other refineries, and offering clients the most reputable logistics service providers to provide a seamless yet flexible service for the buying, transportation, storing, and insuring of precious metals.
The firm’s literature explains that investors can choose from all four precious metals - gold, silver, platinum and palladium, and they can buy in a wide range of weights and sizes, all through the medium of the standard-setting and highly reputable London Bullion Market Association (LBMA), which offers surety of the metals origin, authenticity and quality.
“We offer clients access to the largest and most reputable LBMA refiners in the world,” Nicolas Mathier, GPM’s CEO, reports. “Bullion is made for order and comes directly from the refinery, so provenance and integrity of the metal are guaranteed.”
He explains that GPM then offers fully insured storage in vaults located in free-trade zones around the world, where clients can as they wish go to view and withdraw the precious metals at their convenience, as well as being able to collect, take delivery or sell at any time. Custody is both allocated and segregated.
“We also offer a fully transparent pricing and process, and access to what is a very liquid two-way market,” Mathier adds. “We work with leading logistics service providers who have more than 80 years of experience in transporting precious commodities, and who provide assured delivery and point-to-point flexibility.”
Importantly, GPM’s solutions for its wealthy clients are both secure and confidential. “The clients have direct ownership of their assets,” Mathier reports. “The assets are not on anyone’s balance sheet, and as they are outside the financial system, there is, therefore, no credit or counterparty risk.”
These assets are segregated, meaning that the client holdings are identified by serial number, so there is no co-mingling of client assets. Legal title is unencumbered.
“And as gold is a commodity and therefore not considered a financial product, there is no reporting requirement for trading, storage and transportation,” Mathier notes. “In fact, the identity of the client is only known by and retained by us here at GPM.”
Annual storage and management fees are priced at 0.5% annum and include fully allocated and segregated storage in secure vaults, flexible, user-specific management and value-added services, the option for clients to inspect holdings at any time, as well as full insurance and statutory financial audits and periodic valuations.
Mathier was instrumental in the creation of GPM from the outset in 2011, along with with the firm’s Chairman David Fergusson. GPM’s parent company is, in fact, a family holding company, Nimoi Holdings Pte. Ltd., whose roots date back to 1959 when its predecessor, Woodside Holdings, was established as a family office in the then British Colony of Singapore by the current Chairman’s grandfather, Sir Ewen Fergusson.
David Fergusson himself gave a fascinating presentation at a Hubbis event in 2019 when he told delegates that the origins of the business came when he found that for his family office operation he could not buy and store gold in a convenient manner. “We had looked at ETFs, derivatives and other options and none of them worked for us from the risk perspective,” he explained. “We made a good decision because we soon found that there were many people with a similar need.”
Hence the origins of GPM, which this quarter will expand to 14 full-time team members in Singapore, and which is expanding its reach across the region and indeed for clients from Europe seeking to either transact or store through Asia.
More from Heena Mayani, Global Precious Metals