For Frank Holmes, CEO and CIO at U.S. Global Investors, the world might seem a precarious place. At its heyday in 2006 the mutual fund manager finished the year at $33.58. Now, a decade later and the world looks different. Passive investing is like a weed taking over the finely pruned mutual fund world and the Department of Labor’s fiduciary rule is breathing down the mutual fund industry’s neck. It is here Holmes sees his stock trading at $1.57 and he realizes what volatility is all about.

U.S. Global Investors must understand volatility — in their own stock

In a conference call last February, Holmes noted that, with the stock trading near the lowest point in history, their own stock price has been tremendously volatile over the past decade after a long period of slumber.

The standard deviation for the stock is plus or minus 4% — a feat which happens nearly 70% of the time. Over a six-month period of time it is not unusual to see GROW stock move as much as 68%, a feat it has accomplished several times over the last decade. To put the volatility in perspective, the S&P 500 a similar six-month price moving average is closer to 18%.

“Understanding volatility has helped us because for our particular gold funds we have lower volatility versus the other gold funds and it’s how we manage the cash, because we understand this DNA of volatility and we’ve always commented to investors, don’t be afraid of volatility, understand what it is and be prepared for it to be able to benefit from it,” he said in the conference call.

There are numerous challenges facing mutual funds, particularly those where an easily accessible market beta can be cheaply purchased through stock or commodity market ETFs.

The firm, which manages eight mutual funds ranging from volatile commodity, mining and Chinese exposure to the “All American Equity Fund”, complains that platform fees are just some of the many issues that making operating a mutual fund challenging.

For U.S. Global Investors the challenge is in part product differentiation and the increasingly high cost of doing business. For instance, just to access retail investors they are required to pay intermediaries significant sums just to play on the platform.

“It’s just more and more expensive, your flexibility and latitude to getting on platforms, many of the platforms now, like Morgan Stanley, to get on their platform we have to spend  $150,000, some others it becomes very, very expensive,” he said in an investor conference call.

The company’s fate can, in part, be measured by its assets under management, due to the direct correlation with fee revenue.

Depending on the mix of assets in the fund, U.S. Global Investors has a breakeven between $600 million and $1.2 billion, according to Lisa Callicotte, the firm’s CFO, which recently engaged in cost cutting to keep overhead low. “Our strategic moves to outsource and cut cost have allowed us to be more profitable at lower asset models,” she noted, pointing to last years breakeven AUM number of $1.2 billion.

The good news for U.S. Global Investors is that average assets under management, which had been experiencing sharp outflows, “appears that we’ve bottomed and have found a trough,” Holmes said.

But it is the Department of Labor’s fiduciary rule that could result in the most significant impact on the firm. The rule, which is currently under consideration in the Trump administration for being repealed, is a political football. The Department of Labor hasn’t delayed the rule’s implementation and President Trump has yet to mention the words “fiduciary rule” since taking office.

For U.S. Global Investors, this could have a significant impact:

The regulatory costs and retail investors are being harmed by the interpretation of this fiduciary role, even though it’s being pushed back by new elected President Trump. Some of the firms are still hearing to it and the severe bluntness, just like the severe bluntness of the no-travel for Muslim countries that are enemies of our state, it’s so blunt interpretation of fiduciary role and basically as said that you can’t buy Starbucks, because their coffee is too expensive. You can only buy cheap funds. It didn’t matter the performance, it didn’t matter your 5-star, if you’re going to be on a platform, it’s only the cheapest, cheapest, cheapest. And so we saw that as another factor being of pulled off of platforms and redemptions taking place and money going into – where the cheapest product has nothing to do with what is the best performing. Maybe that will change with some of these new regulatory pronouncements and leadership, but the small fund family, the small funds, and small shareholder account are all experiencing rising regulatory and distribution costs. And that’s been a big impact to overall cost structure, which is making me non-competitive, not just because you look expensive, but it’s now regulatory push.

The heyday for the active investing industry, in part, can be seen in the chart of GROW. Where it goes from here likely depends on its ability to be a financial innovator.