Sector goes for gold
Share
Junior Mining Fund
Type: Oeic
Aim: Growth by investing globally in the shares of small and medium-sized mining companies
Minimum investment: Lump sum £1,000, monthly £100
Investment split: 70% gold shares, 10% other precious metals shares, 10% base metals shares, 10% uranium shares
Isa link: Yes
Charges: Initial 5.25%, annual 1.75%
Special offer: Initial charge reduced to 0.5%, annual reduced to 1.5%
Offer period: Until September 30, 2009
Commission: Subject to negotiation
Tel: 0808 145 2501
The junior mining trust from Sector Investment Managers aims for growth by investing globally in a portfolio consisting mainly of small and medium-sized mining companies. The fund will invest mainly in gold mining shares, but will also include companies that mine other precious metals, base metals and uranium.
Hargreaves Lansdown investment manager Ben Yearsley sees this as a relatively exciting fund. “I should state at the outset that it is high risk. Over the long term I like the global resource story. It is clear that the world is developing which means there will be greater demand for many different resources. “
Yearsley adds that fund manager Angelos Damaskos believes that small companies in the mining sector will have a far greater growth potential and have more opportunity for doubling, or more, in size than some of the big companies that dominate the sector. Yearsley observes that Damaskos has a great deal of expertise in small commodity companies, successfully managing the junior oils fund for a number of years.
“This is a high risk product and therefore it should only form a small part of investors’ portfolios. This fund could easily either be the best performer in a year or the worst performer,” says Yearsley.
Yearsley is not sure how widely available this fund is and highlights this as a potential problem that advisers may face. He says it is available through Hargreave’s Lansdown’s vantage supermarket but is not sure where else it can be bought.
Assessing the charges and IFA remuneration, Yearsley says “They are fairly standard for a relatively small boutique fund. There is no performance fee and the charges are not out of line with similar boutique funds,” he says.
Turning to the potential drawbacks of the fund Yearsley says: “I think the biggest problem with this fund is the high risk nature of it and potential illiquidity of some of the holdings.He says this is not a problem if you want to stay in the fund for the long term but if you wanted to exit quickly you may get caught out.
“However, the risks are there from the start and you should be well aware of them prior to investing any money. I do not see many other downsides as it basically says what it does on the tin.”
Although the fund is high risk, Yearsley notes the manager is very focused and devoting his time to investing in small cap commodity companies.
Discussing the likely competition, Yearsley points out that there are not many funds that provide direct comparisons. “You would obviously look at big resource funds such as JPMorgan natural resources or First State global resources, but the only one that really has invested in small cap commodity companies is the Oceanic Australian natural resources fund, and that does not have such a gold bias. “
The Blackrock gold & general fund is also an obvious comparison, but invests mainly in bigger companies. Yearsley says that around 70 per cent if the fund is invested in gold mining companies.”
Summing up, Yearsley says: “Many commentators believe that gold companies are at an historic low compared to the gold price and that there is a huge amount of appreciation. I think this is an interesting fund launch from a manger dedicated to the smaller end of the commodity company space. It is definitely high risk but has potentially high rewards.”
BROKER RATINGS
Suitability to market: Good
Investment strategy: Good
Charges: Average
Adviser remuneration: Average
Overall 8/10
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