Following in the footsteps of PIMCO's successful exchange traded fund adaptation of its flagship mutual fund, Axel Merk, the so-called Authority of Currencies, is planning to market an ETF version of its Merk Hard Currency Fund.
According to a regulatory filing, the Merk Hard Currency ETF (HRD) will hold at least 80% of its assets in "hard currency" denominated investments comprised of high quality, short-term debt instruments, including sovereign debt and gold. Hard currencies are what Merk describes as currencies of countries pursuing "sound" monetary policy, which fosters long-term price stability, and gold, which is the only currency with intrinsic value and qualifies as a hard currency. No expense ratios were provided.
Merk will analyze monetary policies pursued by central banks and economic conditions to determine currency allocations in the fund.
The prospectus states that the fund won't hold gold bullion. Instead, it may gain its gold exposure through exchange traded products. It should be noted that the ETF may execute redemptions for cash, which could trigger higher annual capital gains distributions compared to funds only using in-kind transactions. Furthermore, investors should be aware that changes in the foreign exchange market will affect the U.S. dollar value of the ETF.
The Merk Hard Currency Fund (MERKX) reflects the performance of hard currencies against the U.S. dollar. The fund has an expense ratio of 1.30% and held $567.1 million in assets as of March 16. The institutional class share issues an expense ratio of 1.05%.
Merk Hard Currency Fund
Max Chen contributed to this article.