Type: Offshore Oeic
Aim: growth by investing globally in the equities and equity-related securities of companies in the mining sector and related sectors
Minimum investment:Lump sum £2,500 $5,000 or euro 3,500
Investment split: 23.7% UK, 18.8% Canada, 17.9% Australia, 8% Africa, 5.9% US, 4.2% Latin America, 4% Europe, 2.5% Asia, 9.7% exchange traded commodities, 5.2% cash
Place of registration: Dublin
Charges: Initial 5%, annual 1.5%
Commission: Subject to negotiation
Baring Asset Management has introduced its global mining fund to take advantage of long-term opportunities in the resources sector that are driven by strong demand and constrained supply. The fund will invest in equities and related securities based on growth at a reasonable price. It is positioned to take advantage of current investment opportunities brought about by China’s for commodities and the demand for gold from the developing middle class in India, while anticipating demand in the future from emerging economies across Latin America and Asia.
Chelsea Financial Services managing director Darius McDermott feels this fund could be interesting if an investor believes in the ongoing urbanisation and industrialisation of emerging markets; or the increasing demand and finite supply of commodities, and has the conviction of their thoughts. “It’s never going to be for the faint-hearted though. If you Google mining stocks, you are as likely to see headlines of “FTSE lifted by miners” as “Miners lead FTSE to worst week this year”. And that’s on a weekly, if not daily, basis,” he says.
McDermott highlights the positives for the fund, including the experience of the manager and the wider global resources team of four, led by Jonathan Blake. “Clive Burstow, who manages the fund, has more than eight years’ experience investing in the mining sector and worked with the BlackRock team, whom I rate very highly, for a few years.
“The manager also has access to the ideas of the seven-strong Baring energy & materials team. The team will be looking for trends evolving over the next five years, not thinking about short-term movements in the market. They’ve stated that they will view any periods of market weakness as potential buying opportunities,” says McDermott.
He adds that the other major positive is the diversification of the fund. He points out that the geographies of the companies in which it invest are mainly developed, with around 23 per cent in the UK, 19 per cent in Canada, 18 per cent in Australia and 6 per cent in the US. “There is also a decent amount in Africa – 8 per cent – with 4 per cent in Latin America and a little in Asia – 2.5 per cent. However, the fund also invests across five sections of mining: non-ferrous and ferrous metals, bulk and speciality commodities and precious metals.”
McDermott observes that the fund is currently skewed towards non-ferrous and precious metals, at around 40 per cent and 38 per cent of the portfolio respectively. “There is around 16 per cent in bulk commodities and a very small weighting in speciality commodities, but nothing in ferrous metals,” says McDermott.
McDermott adds that the fund also has the ability to invest in companies throughout the capitalisation range. “This means that it will invest in the bigger, more well known companies, but also in smaller companies at earlier stages of exploration and development where the analyst coverage is more limited and where the team believes they will be able to add significant value.”
Turning to the potential drawbacks, McDermott says: “The fund’s diversity is good, but it does mean that there will be risks, particularly in smaller companies and those listed in emerging markets which will be more susceptible other risks such as political and liquidity risks.”
He concludes that competition in this area of the market is tough, with very well established players such as JP Morgan and BlackRock.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average