Five top-performing commodity funds

Five top-performing commodity funds

Commodities have faced a miserable run in the last two years. Despite this, certain market players remain hopeful and say there is strong evidence that sentiment is turning in the space.

Neil Gregson, fund manager for the £1 billion JPMorgan Natural Resources fund, explains investors have suffered severely over the last two years in the fund in absolute terms, but relative to its peers and the index benchmark, this negative performance has been exacerbated by the fund's small-cap bias.

He says: "What is of enormous importance is that the fund's small-cap bias should also help us to outperform when the sector is more favourable."

Gregson points out however that stock selection has been good in large caps; he has held Rio Tinto (RIO), Freeport-McMoran (FCX) and Fortescue Metals, which he says have all performed well. He adds: "From an asset allocation view, our underweight in gold versus the [benchmark] comparator has contributed positively to performance, even though the macro backdrop was supportive. '

He points out that sentiment to gold was positive due to postponement of quantitative easing tapering and the US government shutdown.

However, Jeremy Le Sueur, managing director of 4 Shires Asset Management, says: "My well-placed source [at a commodities trading house] is of the view that it is too early yet to be keen on commodities, as he is watching physical shipments and can see oversupply and weak demand."

Nevertheless Le Sueur reckons gold and platinum are beginning to be interesting. "The latter is due to the cut in production at the Bushveld mines in South Africa, which account for around 80% of all known platinum. Gold still has a little bit more downside, but again production cuts should bring the metal into a better supply/demand balance. Indian and Chinese buyers are sensitive to price, and will be absorbing some of the supply, part of which is coming from central-bank sales."

Le Sueur recommends the £768 million BlackRock World Mining fund managed by Evy Hambro, as a core holding in the sector, or, for more of a gold flavour, BlackRock Gold and General unit trust. He adds: "[Platinum group metals] are best bought through direct stock exposure e.g. Aquarius Platinum (AQP), Lonmin (LMI) or Amplats."

Below we highlight four funds in the commodities space which have performed well over a four-month period. The £147.6 million Investec Enhanced Natural Resources fund, managed by Bradley George and George Cheveley, and the £477.6 million First State Global Resources fund, managed by Joanne Warner, also rank highly.

Four-month performance (30/06/2013-31/10/2013)
Fund
Performance
JPMorgan Natural Resources
+16%
BlackRock Gold and General
+13%

Investec Enhanced Natural Resources

+4%
First State Global Resources
+13%
Comparator
+9%
Source: Bloomberg.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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Fund Data
Name1 Year (%)3 Years (%)5 Years (%)Rating
BlackRock Gold & General9.63-48.74-22.364 star(s)
BlackRock World Mining IT13.14-32.4135.13N/A star(s)
First State Gbl Resrcs15.73-32.1721.261 star(s)
Investec Enhanced Nat Res2.27-19.3310.391 star(s)
JPM Natural Resources16.68-40.257.243 star(s)

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