The new fund, a Sicav, will have a concentrated portfolio of 30-50 stocks in the global energy and basic materials sectors.
Fund mangers Duncan Goodwin and Chris Butler, who also run the long and short global resources fund. Goodwin, has 11 year’s experience and has co-managed the Martin Currie long/short global resources fund with Butler since April 2005. He was previously director of equity research for oil and gas stocks at Merrill Lynch, Butler has co-managed the Martin Currie long/short global resources fund since launch in October 2003 and has 16 years’ experience at Martin Currie.
Goodwin and Butler will select their best stock ideas for the portfolio. Their stockpicking will be unconstrained by considerations such as tracking error, sub-sector limits and market caps. The only restriction is that no more than 7 per cent of the fund can be invested in any individual stock.
When building the portfolio Goodwin and Butler start from a universe of around 730 stocks. They focus on those, which are undergoing a change at company level that should improve share prices. Examples include companies that are restructuring or are involved in mergers & acquisitions activity.
The fund managers will assess companies’ balance sheets and cash flow in relation to expectations. Other important factors are whether the changes taking place are already reflected in the share price and whether the changes will lead to sustainable growth.
Martin Currie regards global resources as a large and liquid sector, with its various sub-sectors such as oil and gas, metals and mining and construction materials providing variable correlations and volatility levels over time.
Demand for natural resources from China, which is greater than the supply, has helped drive up share prices of companies in this field. However, the recent rise in Chinese interest rates, while small relative to the growth in the economy, could indicate a trend towards a reduction in growth rates. If this continues, liquidity could be reduced and commodities stocks could increase in volatility.