To meet this demand, a recent new entrant to the AFI Balanced Fund Index in the May rebalancing was the Investec global energy fund.
The fund joins the JP Morgan natural resources and M&G global basics funds in the Balanced index.
However, City Asset Management chief investment officer Hilary Coghill says the Investec fund is the purest play on oil and energy. She says: “There are few ways of accessing the high oil price globally via a long-only fund.” The Investec fund is one because it invests solely in oil and energy companies.
Tim Guinness was replaced as manager of the Investec fund in March following the arrival of Mark Lacey and Jonathan Waghorn from Goldman Sachs. Guinness had managed the offshore fund since 1998 following Investec’s purchase of Guinness Flight that year.
Coghill says: “We have met the new managers and were impressed. They had a good track record at Goldman Sachs and have already made the fund more diversified.”
However, Coghill’s fund choice for the sector is M&G global basics fund, which she added to her AFI selections in May.
She says: “The M&G fund holds both soft and hard commodities which means that if the oil price does fall, the fund can be more flexible in what it does.”
Chelsea Financial Services managing director Darius McDermott added the M&G fund to his Balanced and Aggressive AFI choices in May. He says the fund replaced the JPM natural resources fund in his selection because he considers it “a more rounded offering”.
He says: “We felt commodities have started to become slightly overvalued. The JPM fund has done well but we felt it was time for a change and to go for a more general resources play.”
However, McDermott still rates the JPM fund. He says Ian Henderson is one of the most experienced resources’ managers and he also likes the First State global resources fund run by Joanne Warner. According to McDermott, over the past 12 months, the First State fund, which is included in the AFI Aggressive index, has returned 23.9 per cent compared with the JPM fund which is up by 4.1 per cent.
Rowan head of research Tim Cockerill has no direct AFI exposure to natural resources. He says: “The asset class has done nicely but we ask why oil has reached as high as $145 a barrel, which is a 100 per cent rise in the last 12 months, when demand is only up by 1 per cent.
“We think it has been pushed up by investors and speculators and that at some point it will fall to closer to $80 to $95 a barrel. This is not a bullish outlook.”