The new fund is based on the energy component of Martin Currie’s offshore global resources fund and will use the same investment process and strategy.
Fund managers Duncan Goodwin and Ruairidh Stewart , who also manage the offshore fund, will fill the portfolio with 30 to 50 of their best ideas. They not be bound by benchmark weightings and can invest in companies of any size within any sub-sector.
The managers believe now is a good time to invest in global energy because supply is becoming constrained as producers cut costs and limit output in response to falling commodity prices. Valuations of some oil and gas companies are low but unlike the commodity futures market, the equity market is not factoring in a rebound in oil prices or a reduction in costs over the next 12 months. This gap between equity valuations and commodities futures can provide Martin Currie’s managers with arbitrage opportunities.
Goodwin and Stewart view global energy as a stockpicker’s market because returns may vary across sub-sectors which have different levels of supply and demand. They also expect returns to differ between firms in the same sub-sector because company specific changes such as new discoveries and restructuring could impact on earnings, cash flow, balance sheets and ultimately the share price.
A specialist equity fund may not be at the top of advisers’ lists while clients are flocking to bond funds. However, Martin Currie’s credentials as a big boutique and the track record of its managers should stand it in good stead.