John Rustad, leader of the Conservative Party of British Columbia (BC), has taken an unconventional approach to personal investments by placing a significant portion of his financial portfolio in gold. This strategy, often associated with hedging against inflation or preparing for economic instability, stands out in political circles, where diversified investment portfolios are more typical.
Rustad’s investment choices have come to light through public disclosure requirements, shedding light on the financial decisions of a politician within striking distance of becoming BC’s next premier. His strong bet on gold signals both confidence in the precious metal and a possible precaution against future economic volatility.
A Portfolio Dominated by Gold
According to his latest public financial disclosure, 61-year-old Rustad, along with his wife Kim Royle, has placed nearly all their registered investments in gold. The only holdings listed in their tax-free savings accounts (TFSA) and registered retirement savings plans (RRSP) are investments in “Horizon Beta Pro Gold,” a fund known for providing leveraged exposure to gold bullion prices.
Beyond the registered accounts, Rustad also holds shares in another gold-related fund, “Horizon Beta Pro Canadian Gold Miners ETF,” which invests in companies involved in gold mining. Additionally, he has a stake in Wheaton Precious Metals, a prominent mining company. Rustad’s investments also include more conservative options like guaranteed investment certificates (GICs) and term deposits, as well as four parcels of land and a woodlot licence in northern BC.
Rustad’s aggressive focus on gold investments is unusual for a political leader, raising questions about the motivation behind this strategy. While many investors turn to gold as a hedge against inflation or market downturns, Rustad’s choice to concentrate so heavily in this single asset class stands out for its boldness.
Horizons BetaPro: A High-Risk, High-Reward Strategy
The Horizons BetaPro funds, which make up the core of Rustad’s portfolio, are known for offering market-savvy investors leveraged exposure to various indices or commodities. These funds are designed to amplify the returns of the underlying asset, in this case, gold, by a factor of two or more. This means that if the price of gold rises, the value of the fund increases at double the rate. However, the reverse is also true—any drop in gold prices would lead to a steeper decline in the value of the investment.
In an interim report for one of the funds, Rohit Mehta, president and CEO of Horizons ETFs Management (Canada) Inc., described the funds as tools for investors seeking leveraged or inverse exposure to commodities. Horizons’ lineup includes funds that not only bet on gold prices rising but also allow investors to take short positions, betting on gold prices falling. Rustad’s heavy investment in these leveraged products indicates a willingness to accept higher risk in exchange for potentially higher returns.
Rustad’s Recent Moves into Gold
According to the public disclosure forms, Rustad’s wife purchased shares in the Horizons gold fund on December 7, 2023, with Rustad following suit later that month. Since that time, the Horizons BetaPro Gold fund has appreciated by roughly 60%, suggesting that Rustad’s bet on gold has so far paid off.
This substantial gain in gold prices has been driven by a mix of factors, including economic uncertainty, inflation concerns, and a rush by some investors to acquire safe-haven assets. Earlier this year, CNBC reported that “doomsday preppers” were contributing to a rise in the price of gold and silver, as they stockpiled the metals along with food and water in anticipation of a potential disaster.
Despite Rustad’s apparent gains, gold’s volatility means there are no guarantees of sustained profitability. For example, the couple’s past investments in precious metals have not always been as successful. In 2022, Rustad and his wife were heavily invested in the Horizons BetaPro Silver ETF, a position that lost 15% in value over a six-month period. This episode highlights the inherent risks in betting on precious metals, even for seasoned investors like Rustad.
A History of Precious Metal Investments
Rustad’s financial disclosures indicate that his involvement with gold and silver investments is not new. As far back as March 2020, during the early days of the COVID-19 pandemic, Rustad and his wife bought shares in both Barrick Gold and the Horizons BetaPro Canadian Gold Miners ETF. Barrick Gold, one of the largest gold mining companies in the world, saw its stock price plummet at the outset of the pandemic but later recovered, leading Rustad to sell his shares at the end of July 2020, when the price had nearly doubled from its low point.
The couple’s other investments in the Horizons BetaPro Canadian Gold Miners ETF, which itself holds significant shares in Barrick, were less clear from the public record. By May 2021, the ETF was no longer listed in Rustad’s financial disclosures, indicating that it may have been sold before further price fluctuations.
These transactions underscore the volatility of the precious metals market and the timing required to capitalize on price swings. While Rustad and his wife have experienced gains, their past investments also reflect periods of loss, which is not uncommon in the high-risk world of leveraged gold funds.
Rustad’s Political Future and His Investments
Rustad’s rise in BC politics has been fueled in part by business interests rallying behind his campaign. In recent months, BC United suspended its campaign to allow Conservatives to consolidate the anti-NDP vote, positioning Rustad as a strong contender for the premiership. His investment strategy, however, stands in stark contrast to the more traditional portfolios held by his political peers.
For instance, BC NDP Leader David Eby’s most recent financial disclosure paints a very different picture. Eby’s RRSP, RESP, and TFSA investments are all in portfolios where the specific contents and advice provided by financial managers are not disclosed to the member. Eby’s wife, Cailey Lynch, a family doctor, holds no investments according to the filings, and her main financial concern is repaying student loans.
Rustad’s highly concentrated bet on gold and precious metals is a unique reflection of his personal views on economic security and market instability. It also suggests a level of independence in his financial decision-making, as few politicians are as publicly committed to such a singular investment strategy.
Gold as a Hedge or a Gamble?
Investment experts often recommend diversification to mitigate risk, with precious metals typically making up only a small portion of a well-balanced portfolio. The website Investopedia describes gold as a “prudent way to diversify” but cautions against allocating more than 10% of a portfolio to the metal due to its volatility. The “Doomsday Prepper’s Guide to Precious Metals” echoes this sentiment, suggesting that a heavy concentration in gold should be undertaken with extreme caution.
Rustad’s financial disclosure, while not revealing the total value of his investments, indicates a level of concentration in gold far above these recommended thresholds. While this approach has so far proven lucrative, it carries risks that could become more pronounced if gold prices experience a downturn. As global markets remain unpredictable, Rustad’s future financial gains or losses may well be tied to his continued reliance on the performance of gold.
In summary, John Rustad’s significant investment in gold is a bold and unorthodox strategy, reflecting his personal views on economic security and financial planning. As he moves closer to a potential premiership, his financial disclosures provide an intriguing glimpse into the mindset of a political leader willing to bet big on one of the world’s oldest safe-haven assets.
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