Investec Asset Management has created an onshore version of its offshore global energy fund in response to IFA demand for a Ucits-qualifying fund in this sector.
The fund will mirror the Guernsey-domiciled GSF global energy fund and will aim for growth by investing globally in companies involved in the explanation, production or distribution of oil, gas and other energy sources.
It will be run by the same management team as the offshore fund, which is headed by Tim Guinness. The offshore fund was established in 1985 and Guinness has been managing it since 1998.
The new fund will invest in between 20 and 30 mid-cap and large-cap stocks. It will be managed on a bottom-up basis, with the individual characteristics of stocks taking priority over geographical weightings. It will invest heavily in oil stocks because Investec believes that they are relatively cheap.
Investec regards oil as an important energy source as it provides fuel for daily essentials such as heating and transport. Demand for oil is growing due to the development of Asia, particularly China, and fears of a cold winter in the US which is putting pressure on oil reserves.
However, oil is a finite source and discoveries of new oil reserves are slowing down. There are also difficulties in negotiating oil supplies from Iraq which is operating under UN sanctions. These factors are likely to drive oil prices higher, providing potential growth for this fund. However, this is a specialist fund which may be suitable only as a small part of a diversified portfolio due to its reliance on one potentially volatile sector.
According to Standard & Poor’s, the GSF global energy fund is ranked first out of 24 funds based on £1,000 invested on a bid-to-bid basis with gross income reinvested over three years to November 15, 2004.