Canadian Investor FAQs

Returns  are based on the future price of gold, silver and platinum for BMG BullionFund, the future price of gold for BMG Gold BullionFund and the future price of silver for the BMG Silver BullionFund, both in Canadian dollars. The value of each BMG Fund, and hence, an investor’s return, varies with the price of the three precious metals in Canadian dollars. The BMG Funds’ prices are negatively correlated to the world’s major currencies. If currencies decline through debasement, we would expect BMG Funds to advance.

A small portion of assets (no more than 5 percent) may be held in cash to allow each Fund to pay expenses and to facilitate any redemption of units.

RBC Investor Services Trust operating as RBC Investor & Treasury Services (RBC I&TS) as custodian for the BMG Funds and the appointment by the custodian of the Royal Canadian Mint (the Mint) and certain sub-custodians of the Mint, including Brink’s Canada Limited (collectively with its global affiliates, Brinks), as sub-custodians of the BMG Funds, holds physical custody of the gold, silver and platinum bullion, on an allocated and insured* basis, on behalf of the Funds’ unitholders. The RBC Investor & Treasury Services (RBC I&TS) may not appoint a subcustodian for this purpose without the prior consent of BMG Funds.

*”Insured basis” refers to certain insurance covering the storage of the physical bullion with RBC Investor & Treasury Services (RBC & I&TS), and does not refer to insurance related to a loss in market value of the underlying holdings. In addition, BMG has insurance on behalf of the Funds to further reduce any risk of certain losses occurring.

With each purchase of precious metals, a confirmation trade is sent by RBC Investor & Treasury Services (RBC I&TS), and a primary bullion dealer. RBC Investor & Treasury Services (RBC I&TS) delivers the purchased bullion to BMG BullionFund, BMG Gold BullionFund and/or BMG Silver BullionFund, and it is stored on an allocated and insured basis in the Custodian’s vault. Confirmation of the exact weight of each bar, the refiner and the bar’s serial number is sent to both the Trustee and the Administrator. At the end of each month, the Custodian provides an updated list of gold, silver and platinum bars that are being held on behalf of each Fund. The list contains a full description, including the exact bar weight to three decimal places, the refiner and the serial number.

To view the bullion holdings lists for BMG BullionFund 
To view the bullion holdings for BMG Gold BullionFund
To view the bullion holdings for BMG Silver BullionFund

In addition, as part of the annual audit, the Funds auditor, RSM Canada LLP, physically counts the bars held on behalf of BMG Funds in the Custodian’s vault facilities, and confirms the bullion holdings in the annual financial statements.

*”Insured basis” refers to certain insurance covering the storage of the physical bullion with the BMG Funds’ Custodian, and does not refer to insurance related to a loss in market value of the underlying holdings.

With a Management Expense Ratio (MER) to consider, you might think it would be cheaper to purchase bullion and store it at home or in a safety deposit box, but there are several factors to consider.

First, while it is certainly possible to purchase bullion from chartered banks or online bullion companies, these companies charge a premium on bullion, and it can be substantial. Premiums of 4 percent for gold, 15 percent for silver and 8 percent for platinum are typical, and they can be higher during shortages. Selling bullion back to these companies will also result in a price that is discounted from the spot price. Over the three metals, the net premium and discount for buying and then reselling bullion can be as high as 15 percent. Second, the precious metals bullion comprising BMG BullionFund, BMG Gold BullionFund and BMG Silver BullionFund are held in storage and covered by insurance that covers many risks associated with that storage. Storing bullion at home comes with its own risks. There is the cost of a home safe, storage space issues and the risk of the bullion being stolen. Insurance companies do not provide coverage for bullion stored either in a safety deposit box or in a home safe. Even with an MER of just over 3 percent, it is less expensive to hold bullion in BMG Funds.

If you were to forgo the insurance and hold bullion at home, the premiums and discounts you have to pay makes holding physical bullion unattractive compared to BMG Funds, which purchase physical precious metals at close to spot price.

The overall costs of buying and holding units of BMG BullionFund,  BMG Gold BullionFund and BMG Silver BullionFund are competitive when compared with most equity funds, even though the costs associated with hard assets are not comparable to those for paper assets. The expenses incurred by BMG Funds exceed the costs of mutual funds that hold stocks or derivatives of physical bullion. BMG Funds are an extremely cost-effective method of owning bullion when compared to purchasing coins or bars from a dealer and arranging and paying for private storage.

BMG BullionFund holds only allocated gold, silver and platinum bullion, with the limited objective of providing a secure, convenient, low-cost, alternative for investors seeking to hold gold, silver and platinum bullion for capital preservation and long-term appreciation. BMG Gold BullionFund holds only allocated gold bullion and BMG Silver BullionFund only holds allocated silver bullion.

As a result, the following risk factors are associated with investing in the Funds:

Precious Metals Risk

The prices for gold, silver and platinum bullion are affected by a variety of factors, including changing supply and demand relationships and international political and economic events. In addition, governments may intervene from time to time, directly and by regulation, in certain markets such as precious metals. These factors will indirectly affect the prices for gold, silver and platinum bullion.

Direct purchases of gold, silver and platinum bullion may generate higher transaction and custody costs than other types of investments.

Availability of Precious Metals Risk

It is possible that BMG BullionFund may not be able to buy gold, silver or platinum bullion from time to time. In such a situation, BMG BullionFund will continue to purchase those metals that are available, but will not be able to achieve its investment objective of holding equal amounts of all three precious metals until all three metals become available again.

Foreign Currency Risk

Gold, silver and platinum bullion are usually traded in US dollars and, as a result, BMG Funds are vulnerable to foreign currency risk, which is the risk that the value of the Canadian dollar will increase as measured against a foreign currency. For example, a precious metal traded in US dollars will fall in value, in Canadian dollar terms, if the Canadian dollar increases in value relative to the US dollar, even though there is no change to the US dollar value of the precious metal. Conversely, if the Canadian dollar falls in value relative to the US dollar, there is a corresponding gain in the value of the precious metal measured in Canadian dollars attributable solely to the change in the exchange rate. BMG Funds do not intend to hedge their foreign currency exposure.

Non-Hedging Strategy Risk

BMG Funds will not invest in derivatives to protect against decreases in the value of gold, silver or platinum bullion.

Specialization Risk

BMG BullionFund will hold only gold, silver and platinum bullion, while BMG Gold BullionFund will hold only gold and BMG Silver BullionFund will hold only silver. As a result, investors should allocate only a percentage of their portfolio to BMG Funds in order to maintain an appropriate level of diversification.

Management Risk

BMG Management Services Inc. is not registered as a portfolio manager, and for this reason BMG Funds have fixed investment policies.

Uninsured Losses Risk

RBC Investor Services Trust, as Custodian, holds physical custody of the gold, silver and platinum bullion assets of BMG Funds on an allocated and *insured basis. The Custodian is obliged to maintain insurance satisfactory to BMG Funds against all risk except the risk of war, nuclear incident or government confiscation.

*”Insured basis” refers to certain insurance covering the storage of the physical bullion with the BMG Funds’ Custodian, and does not refer to insurance related to a loss in market value of the underlying holdings.

Tax Risk

It is anticipated that, for the purpose of computing its income under the Income Tax Act (Canada), each Fund will generally treat gains (or losses) as a result of dispositions of physical gold, silver and platinum bullion, as applicable, as capital gains (or capital losses), although depending on the circumstances, they may instead include (or deduct) the full amount of such gains in computing their income. If any transactions of a Fund are reported by it on capital account but are subsequently determined by the Canada Revenue Agency to be on income account, there may be an increase in the net income of that Fund for tax purposes and the taxable component of redemption proceeds (or any other amounts) distributed to unitholders, with the result that Canadian-resident unitholders could be reassessed by the Canada Revenue Agency to increase their taxable income by the amount of such increase, and non-resident unitholders potentially could be assessed directly by the Canada Revenue Agency for Canadian withholding tax on the amount of net gains on such transactions that were treated by the Canada Revenue Agency as having been distributed to them.

The Canada Revenue Agency can assess a Fund for its failure to withhold tax on distributions made by it to non-resident unitholders who are subject to withholding tax, and typically would do so rather than assessing the non-resident unitholders directly. Accordingly, any such re-determination by the Canada Revenue Agency may result in the Funds being liable for unremitted withholding taxes on prior distributions made to unitholders who were not resident in Canada for the purposes of the Income Tax Act (Canada) at the time of the distribution. As the Funds may not be able to recover such withholding taxes from the non-resident unitholders whose units were redeemed, payment of any such amounts by the Funds would reduce the Net Asset Value of the units of the Funds.

Many factors account for the variable between precious metals prices and the prices of BMG BullionFund, BMG Gold BullionFund and BMG Silver BullionFund.

The Net Asset Value (NAV) per unit for BMG Funds is set via the London Fix price for gold, silver and platinum each day, based on the closing prices for each metal and the prevailing exchange rate. Any investment funds received before 4:00 pm EST will be allocated the appropriate number of units based on the end-of-day NAV. The price of the metals would have fluctuated throughout the day, and the London Fix may be considerably different from the high, the low or the average price. This occurs with all funds; however, with traditional funds that have numerous investments, it is not apparent.

BMG Funds receive money in both Canadian and US dollars, but always purchase bullion in US dollars, and so incur currency conversion costs. Hedging is something we do not employ due to the added risks and/or costs. Once hedging is employed, the Funds stop being bullion and become dependent on the manager’s hedging skills. Bullion is liquid, incurs no counterparty risks, and does not depend on a manager for performance. Hedging would compromise two of these attributes. To employ a hedging strategy and add risk to an asset that is acting as a hedge against currencies defeats the purpose of investing in bullion. BMG Funds are the purest bullion funds available because they maintain the three fundamental attributes of bullion.

BMG Funds, and indeed all other mutual funds, do not have access to an investors’ deposit to the Trust Account for three days, even though the price of the units purchased was set on the day of investment. Precious metals are purchased when an investor’s funds have cleared and are transferred from the Trust Account. Three days later, the price of the metals and the exchange rate can be higher or lower.

Even on a daily basis, prices fluctuate. The prices paid for the metals during the day can be higher or lower than that day’s London PM fix. There could also be an exchange rate differential, as that too varies throughout the day.

The prices paid for the metals are the ask prices. No one can buy at the spot price, be it the NYMEX close or the London Fix, in the same way that no one can buy at the last closing price in a stock. Based on this, comparing to spot is unrealistic. There is a bid/ask spread. The ask prices for each metal in a rising market are higher than spot, and lower than spot in a falling market. Here again, there is a differential between the NAV per unit that is based on the London Fix each day. This price does not necessarily represent the average price, can be dramatically different from the high or the low for the day and does not correspond to the actual prices paid by BMG Funds.

In addition to the ask price there are transaction costs, including bar charges and insured delivery. BMG Funds do not pay any commissions, nor is there any mark-up over cost.

The full amount of each deposit received is not necessarily used to purchase precious metals. Some cash – no more than 5 percent – is held aside for expenses and to meet small redemption requests. Currently the cash component is approximately 1 percent.

The amount of cash is monitored relative to the expenses and redemption requests. Not keeping a minimal percentage in cash would increase overall costs due to selling costs incurred to meet redemption requests. When BMG Funds sell precious metals, they can only receive the bid prices at the time, not yesterday’s spot price.

The above factors are fundamentally similar for all mutual funds, including BMG Funds. As such, it is nearly impossible for the percentage change in BMG Funds’ NAV per unit to be exactly the same as the daily London Fix price for gold, silver and platinum in Canadian dollars. The spot prices are simply a theoretical guideline that cannot correspond to the day-to-day realities, even if you were buying the metals directly outside of either Fund.

Buying the metals directly on a retail basis would cost an average of 7 percent above the ask price, plus bar charges. In addition, charges for delivery, delivery insurance, and storage would be incurred. In effect, BMG Funds provide a tremendous value proposition for investors to own investment-grade bullion in a cost-effective and convenient manner.

Yes. As mutual fund trusts, BMG BullionFund, BMG Gold BullionFund and BMG Silver BullionFund are separate legal entities whose assets are separate and distinct from BMG Management Services Inc., BMG Funds’ Manager and Trustee, and separate and distinct from the assets of RBC Investor & Treasury Services Trust (RBC I&TS), the Custodian for all Funds.

As a result of these arrangements, BMG Funds’ bullion is secure from third-party claims and held solely for the benefit of BMG Funds’ unitholders. BMG Funds’ bullion holdings cannot be co-mingled with holdings of RBC Investor & Treasury Services (RBC I&TS), or holdings of anyone else. BMG Funds’ assets are not subject to seizure by creditors of either RBC Investor & Treasury Services (RBC I&TS) or of BMG Management Services Inc.

RBC Investor & Treasury Services (RBC I&TS) is the Custodian for BMG Funds and has been providing back office services since inception.  RBC I&TS is responsible for the BMG Funds’ non-bullion (cash) and bullion assets.  RBC I&TS, as Custodian, has appointed the Royal Canadian Mint and certain sub-custodian of the Mint, including Brink’s Canada Limited, as sub-custodians of the BMG Funds bullion assets stored on an allocated and insured basis. 

The Administrator of BMG BullionFund,  BMG Gold BullionFund and BMG Silver BullionFund is RBC Investor Services Trust (RBC), a division of the Royal Bank of Canada. RBC administers in excess of US$2 trillion on behalf of mutual funds and hedge funds on a global basis. It is responsible for all BMG Funds’ accounting, calculation of the Net Asset Value (NAV), NAV per unit and the unitholders register.  In addition, RBC is the sub-custodian/administrator of BMG Funds’ bank account, and is responsible for BMG Funds’ banking, record-keeping, daily valuation and processing of all purchases and redemptions. Only RBC has signing authority on the Funds’ account.

The BMG Funds’ assets are held in allocated storage and insured and are not subject to seizure by creditors of either the Custodian or of the BMG Funds’ Manager. The Custodian cannot appoint a Sub-Custodian without approval of the Manager.  A Sub-Custodian would have to meet requirements set out in National Instrument 81-102. The Custodian has no authority to lease or encumber any of the BMG Funds’ assets.  The BMG Funds’ precious metals cannot be co-mingled with RBC Investor Services Trust holdings or the Bank’s other clients. As a mutual fund trust, the BMG Funds are a separate legal entity whose assets are separate and distinct from the fund management.

In the unlikely event that RBC Investor Services Trust became insolvent; the assets of the BMG Funds would not be available to its creditors. In that scenario, the trustee would simply appoint another Custodian and move the BMG Funds’ assets to the new Custodian’s designated facility. If the BMG Funds’ manager, BMG Management Services Inc. (BMS), became insolvent the BMG Funds’ assets would stay in place and would not be subject to seizure by any creditors of BMS. A new trustee/manager would be appointed or the BMG Funds can be wound up, with the proceeds distributed to its unitholders.

If, for some reason, the BMG Funds were wound up, the assets would be sold and the proceeds distributed to unitholders after expenses of the BMG Funds were paid. None of the liabilities of BMS could be paid with these proceeds. The BMG Funds’ expenses might include trustee fees, accounting costs, storage cost and insurance. Unlike traditional liquidations, there would be no distress discount due to a forced liquidation of the bullion.  The precious metals would still be worth the prevailing spot price, thereby retaining their value to unitholders.

Because of the high degree of liquidity in precious metals, there is little risk of the BMG Funds losing value if there is an excess of redemptions or any risk of suspension of redemptions.  Precious metals trade 24 hours a day around the world and are as liquid as US dollars. 

CIPF Members are Dealer Members of the Investment Industry Regulatory Organization of Canada (IIROC). In the unlikely event that the Member you are dealing with becomes insolvent, CIPF will ensure the securities, cash and other property that are held in your account are returned to you in accordance with their Coverage Policy.

In the unlikely event that RBC Investor & Treasury Services (RBC & I&TS) declared bankruptcy, the assets of BMG BullionFund, BMG Gold BullionFund and BMG Silver BullionFund would not be available to creditors. In that scenario, the Trustee would simply move the assets to another bank’s facilities.

If BMG Funds’ manager, BMG Management Services Inc. (BMS), were to declare bankruptcy, the assets would stay in place at RBC Investor Services Trust, and would not be subject to seizure by any creditors of BMS. A new Trustee/Manager would be appointed, or BMG Funds could be wound up, and the proceeds distributed to its unitholders.

If for some reason BMG Funds were wound up, their assets would be sold and the proceeds distributed to unitholders after the expenses of BMG Funds were paid. None of the liabilities of BMS could be paid with these proceeds. BMG Funds’ expenses might include trustee fees, accounting costs, storage costs and insurance premiums. Unlike traditional liquidations, precious metals held by BMG Funds would not be sold at a discount, as is the case in most liquidations, because the bullion holdings would still be worth the prevailing spot price, thereby retaining their full value at the time.

There are stringent procedures in place to prevent fraud and any possible misappropriations of the assets of BMG BullionFund, BMG Gold BullionFund and BMG Silver BullionFund:

Custodian
RBC Investor & Treasury Services (RBC & I&TS), Toronto, Ontario.
RBC I&TS is the Custodian for the BMG Funds’ non-bullion assets (cash) and bullion assets.

Registrar
BMG Management Services Inc., Markham, Ontario is the Registrar and Trustee for BMG Funds.

Administrator
RBC Investor and Treasury Services (RBC & I&TS), Toronto, Ontario
The Administrator provides administration services to BMG Funds.

Auditor
RSM Canada LLP, Toronto, Ontario
The auditor examines the annual financial statements of BMG Funds, and expresses an opinion thereon. The auditor also does a physical count of the bullion of each Fund on an annual basis.

Independent Review Committee
The independent review committee, or IRC, of BMG Funds provides independent oversight and impartial judgment on conflicts of interest involving each respective Fund. Among other matters, the IRC prepares, at least annually, a report of its activities for investors in each Fund that is, or will be, available on our website at bmg-group.com or upon request by any investor, at no cost, by calling: 905.474.1001 or toll-free at 1.888.474.1001, or e-mailing: info@bmg-group.com. The IRC is currently comprised of three members, each of whom is independent of Bullion Management Services Inc., its affiliates and BMG Funds. Additional information about the IRC, including the names of its members, and governance of each Fund, is available in the Annual Information Form of Funds.

In addition, the auditors of BMG Funds may not be changed unless the IRC has approved the change in accordance with National Instrument 81-107 Independent Review Committee for Investment Funds and a written notice describing the change in auditors is sent to unitholders at least 60 days before the effective date of the change.

BMG Group Inc., is an affiliate member of The London Bullion Market Association (LBMA) and only purchases ‘Good Delivery’ bars for its programs, ensuring all precious metals are SRI.

The LBMA Good Delivery List is now widely recognized as representing the de facto standard for the quality of gold and silver bars, in large part thanks to the stringent criteria for assaying standards and bar quality that an applicant must satisfy in order to be listed. The assaying capabilities of refiners on the Good Delivery List are periodically checked under the LBMA’s Proactive Monitoring program.

Investors can read the LBMA “Responsible Gold Guidance” investment guidelines.

The London Bullion Market Association (LBMA) is the international trade association that represents the market for gold and silver bullion, which is centred in London, England but has a global client base, including the majority of the central banks that hold gold, private sector investors, mining companies, producers, refiners and fabricators. The current membership stands at 145 member companies across more than 20 countries around the world.

The LBMA has set up a Responsible Gold Guidance for Good Delivery Refiners in order to combat systemic or wide-spread abuses of human rights, to avoid contributing to conflict, to comply with high standards of anti-money laundering, and to combat terrorist financing practices. This Guidance formalizes and consolidates existing high standards of due diligence among all LBMA Good Delivery Refiners.

Gold is often touted as a poor investment; advisors and the media alike warn investors to avoid it because they think gold is volatile, or because it doesn’t pay dividends. Treating gold as an investment, however, misses the point. Gold is neither a good investment nor a bad investment; gold is money.

Physical gold bullion or physical paper currencies locked in a vault are not invested; they are simply being stored. Since neither is invested, they don’t earn interest or dividends, but equally they don’t have any counterparty risk. The major difference between gold and currencies kept in a vault, however, is that gold’s purchasing power increases over time, while paper currencies’ purchasing power decreases over time.

Gold cannot be devalued by government deficit spending and the corresponding increase in the currency supply that is needed to keep the exponential curve moving.  Gold is not subject to devaluation by inflation; it is negatively correlated to inflation.  In fact, most banks, (especially central banks), view gold as a currency.  This is evidenced by the fact that most large banks trade gold as a currency, not as a commodity.

Gold is money, not a commodity as many investors and advisors incorrectly view it. Gold trades on the currency desks of the major banks and brokerage houses, not the commodity desks. It is a wealth-preserving asset, not a wealth-accumulating asset. We buy and hold gold bullion to preserve wealth. It is important to note that, while we may speculate in gold stocks, exchange-traded funds, futures and options to increase wealth, it is gold bullion ownership that best serves the purpose of wealth preservation.

Gold is often referred to as ‘honest money.’ For money to be considered honest it must be a store of value

and it must provide a firm baseline for measuring the price of goods and services. Gold bullion has both those attributes; fiat currency has neither. Honest money retains its worth by virtue of its intrinsic value.  Paper currencies, or digits on a computer screen, have no value in and of themselves. They cannot be used for anything else.  The over-printing of bank notes backed only by faith dilutes paper currencies’ worth in a way that can never happen with gold. That is why gold and silver are called honest money.

Money must satisfy several functions. It must be: easily transportable; equally divisible; rare; durable; and a store of value.  Gold and silver can never become worthless.  Paper currencies come and go, but precious metals remain valuable.  Gold, silver and platinum are not created from thin air; they are not dependent on a fractional reserve system; they are not dependent on the solvency of an institution; they cannot be obtained easily; and they are the ultimate extinguisher of debt.