Just about any mutual fund company would love to have the kind of year Van Eck Global had in 2010.
Its assets under management, excluding exchange-traded funds, stood at $11.3 billion at the end of December, up from $7.1 billion at the end of 2009 — an increase of nearly 60%.
The niche-oriented New York company attributes much of the success to investor demand for two of its specialties: gold and hard assets.
"Asset class has driven flows to a certain extent," said Kristen Capuano, marketing director for Van Eck's mutual fund business.
But Van Eck's focus — it has just five mutual funds — could make it hard to hold on to its gains. Even Capuano acknowledges that a relatively narrow menu of mutual fund offerings could work against it once the tide of investor interest turns.
"There's always that concern," Capuano said. "But we are constantly trying to diversify our business."
Van Eck's diversification has been mostly on the ETF side. It introduced its Market Vectors family in 2006, and now has 29 ETFs in all.
The company has rolled out mutual funds at a much slower pace.
It added a mutual fund of hedge funds in 2009, and last month launched the CM Commodity Index Fund, which invests in futures among 26 types of commodities.
Van Eck has filed to create an ETF version of the Commodity Index Fund, which is built to minimize contango, a kind of risk arising from differences between spot prices and contract-expiration prices.
Van Eck would no doubt be thrilled if one day those new additions replicated the recent success of its Global Hard Assets Fund and its International Investors Gold Fund.
Net inflows of $1.2 billion in 2010 helped push the assets under management of Global Hard Assets to $4.3 billion by the end of the year, while net flows into International Investors Gold increased its assets to $1.7 billion.
It's true that gold and hard assets — which are investments with intrinsic value such as oil and land — have been in greater demand in general over the past few years. That's largely because of investors' desire to further diversify, and their anticipation of inflation, which can gut the value of other asset classes such as fixed income.
But Van Eck stands out because of its track record in managing these asset classes. Global Hard Assets' 24.26% return over the past year is a full 10 percentage points better than the average of its peers, according to Lipper Inc. Its three-, five- and 10-year returns beat the category by sound margins as well.
International Investors Gold has topped its peers comfortably over the same time frames, according to Lipper. That includes outperforming them over the past year, 38.85% to 32.23%.
Van Eck chalks up the outperformance to its in-depth research and team management.
The Global Hard Assets portfolio, for instance, has a 10-person team, in which senior sector analysts dig deep into subcategories in the areas of base metals and exploration and production, Capuano said.
The company has raised its profile substantially since it launched the Market Vectors family of ETFs. Van Eck's ETFs account for $20 billion of Van Eck's $31.3 billion of assets under management.
But the success of its mutual funds is especially important.
"To earn as much revenue as the mutual fund business, you must be twice, or even three times as successful in the ETF business," said Burton Greenwald, a mutual fund analyst in Philadelphia.
In June 2009, Van Eck launched its Multi-Manager Alternatives Fund, which allocates assets to multiple hedge fund managers. The fund may invest in open- and closed-end funds and ETFs. It is allowed to allocate assets to arbitrage and long/short hedge fund strategies. The fund now has $38 million of assets under management.
While Van Eck has diversified over the past several years, it still has a clear association with its gold-focused roots. Even today, the $9.8 billion of assets in the company's gold products — the mutual fund and two ETFs — account for nearly a third of its assets under management.
