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President's Message

The Bullion Management Group Inc. concept was formed in 1997 when my own research led me to conclude that equity markets were forming a bubble, and that economic conditions were about to deteriorate. My research indicated that the next bull market would be in commodities, particularly precious metals. Gold was under $300 an ounce, and silver was under $5 an ounce.

Throughout my 30-year career in the investment business, I have always maintained that precious metals are a vital component of an investment portfolio. However, it was my firm contention that the investment form had to be actual physical bullion, not a paper derivative such as a futures contract, or an equity interest in a mining company. Although investments in commodity futures and mining stocks were available both directly and through mutual funds, there was no cost-effective, convenient way for Canadians to purchase and hold gold, silver and platinum bullion. Moreover, bullion could not be held in RRSPs or other registered plans.

After further legal research and three years of negotiations with the Ontario Securities Commission, in January 2002 The Millennium BullionFund™ was approved for sale in Ontario. After further negotiations with the remaining provinces and territories, it received complete Canadian approval in May 2003. For the first time, Canadians could fully diversify their portfolios and hold gold, silver and platinum bullion in their RRSPs. In 2008 the name was changed to BMG BullionFund™ in order to present a consistent brand image with our other planned precious metals offerings. In 2005 Class G Units, for global accredited investors, were introduced and most recently, BMG Gold BullionFund.

After three years of software development BMG BullionBars™ was launched.  This product allows high net worth investors to purchase individual bars of gold, silver and platinum through approved dealers as easily as purchasing stocks.  At the investors’ option the bars can be stored on a fully allocated, insured basis with The Bank of Nova Scotia in its Toronto vault.
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The importance of holding precious metals in an investment portfolio has been largely forgotten during the equity bull market of the past 20 years. Unlike traditional financial assets, the value of bullion can never decline to zero. Unlike bonds, bullion is not someone else’s liability, and unlike stocks its value is not based on anyone’s promise of performance. Traditional asset allocation theory, as represented by the investment pyramid, advocates higher risk, less liquid assets at the top, with lower risk, more liquid assets at the bottom. Typically, precious metals and commodities are placed at the top of the pyramid, while cash equivalents are at the base. While placing commodity futures contracts at the top of the pyramid is appropriate, fully allocated physical bullion should form the foundation of the pyramid. For 3,000 years precious metals have been the most liquid, universal form of money throughout the world. They still are.
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Click to view enlarged image


An effectively diversified portfolio should always contain at least 10 percent in physical bullion at all times. Futures contracts, options and mining equities belong in a different asset class, with percentage holdings based on individual investor objectives and risk tolerance. Unallocated bullion, like pool accounts and certificates, can form part of a portfolio’s cash component, but would not form the foundation.

This asset allocation model benefits the investor because precious metals have an inverse relationship to other assets, like stocks and bonds. Holding bullion reduces portfolio volatility and improves returns during normal market conditions. During periods of economic stress bullion acts as portfolio insurance, growing in value and effectively offsetting losses in other asset classes. For added protection in turbulent economic times, bullion allocation should be increased to at least 20 percent.

I’ve always been a realist when it comes to our economic future.  I hope for the best but plan for the worst. The worst is now at our doorstep, and now is the time to strip away outdated thinking and plan a different strategy that is in sync with current trends. The next 20 years will not be like the last 20 years.

Sincerely,

 

Nick Barisheff

President and CEO | Bullion Management Group Inc.

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