By Gary Shepherd
Thematic funds offer a
mixed bag of returns in the
best times, let alone during
a global recession.
While those funds that
invest in renewable energy
sources may appear to be
a safe long-term bet given
concerns about global
warming, questions remain
about the health of the
financials, real estate and
consumer goods sectors
which have had to bear the
brunt of the losses so far
during this downturn.
Some sectors are impacted
quickly by changes to
the macro environment,
such as gold, which has
become increasingly popular
this year as an inflation
hedge. But other alternatives
can be slow burners.
Natural resource funds for
example are likely to gain
more traction as investors
see the benefits of diversifying
away from traditional
asset classes.
msci World index – 3-year performance
40
20
% 0
-20
-40
Jun ’06 Dec Jun ’07 Dec Jun ’08 Dec Jun ’09
19 Jun ’06 – 22 Jun ’09. No thematic sector. Source: Morningstar
Liane Luke, chief timber
officer at FourWinds Capital
Management, which also
offers funds across the
energy, metal, agriculture,
waste and water sectors,
believes there has been a
sea-change in investor
appetites for natural
resources and real assets.
“Investors are looking at
their portfolios and thinking
that they want adequate
diversification, complete
transparency and no
more mystery meat in their
portfolios,” she says.
“If you call traditional
assets stocks and bonds,
they are clearly much larger
than timber or water.
“But if you talk about
structured or engineered
financial products, I think
they are a thing of the past;
unless you are a very
sophisticated investor and
know what is being
served up.”
Luke runs FourWinds’
Phaunos Timber Fund.
Specifically on the future
of this asset class, she
Fund selector thematic
Sorting wheat from chaff
So-called thematic funds are a useful way to play an investor’s conviction in particular
sectors, from financials through to gold, biotech or natural resources. But returns can
vary wildly between the different sectors and asset classes
adds: “Timber is not correlated
with the other
assets in your portfolio –
the trees grow and add
volume no matter what
equities or other assets
are doing.
“Long term, if you do
not have any gearing on
the portfolio, you have a
pretty good chance of not
only preserving your capital,
but of increasing it.”
Despite these arguments,
nearly all the funds
covered here registered a
negative performance over
the past 12 months, as you
might expect as asset classes
have become more
closely correlated.
It will be interesting to
see how our fund tables
have changed in another
three years time, particularly
if commodities maintain
a long-term upward trend
and if more of the larger
fund groups cater to apparent
investor demand for
expanding their product
ranges with more niche
thematic vehicles.
“
Long term, if
you do not have
any gearing on the
portfolio, you have
a pretty good chance
of not only preserving
your capital, but of
increasing it
”
Liane Luke, chief timber officer,
FourWinds Capital Management
August 2009 [www.international-adviser.com] INtERNAtIONAL ADVIsER
19
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