Commodity and natural resources funds with 3-year track record*
Size Base 1-year 3-year 3-year 3-year 3-year 3-year Launch Dom M’star
(£m) curr return return alpha beta Sharpe Sortino date rating
First State Global Resources A Acc 370.37 £ -46.29 2.27 3.4 1.28 0.01 -0.16 27 Oct ’03 UK ��
Baring Global Resources Fund Inc 586.48 $ -47.43 2.12 4.06 1.35 0.02 -0.15 12 Dec ’94 Ire ��
BGF World Mining A2 $ 4,624.97 $ -56.76 1.83 5.1 1.46 0.04 -0.15 24 Mar ’97 Lux �����
First State Global Resource $ 145.7 $ -45.8 1.65 2.51 1.25 -0.02 -0.18 31 Oct ’03 Sing ��
JPM Natural Resources A Acc 700.4 £ -59.7 -4.62 -1.80 1.4 -0.13 -0.32 1 Jun ’65 UK ����
The funds listed are the only products to have a three-year track record. Source: Morningstar
folio,” he says. “Also, until
recently there were few
commodity funds or ETFs
available for UK investors,
whereas structured products
have been popular as
a pure access trade.”
The area is certainly
growing in popularity.
There are 38 commoditieslinked
products currently
available, almost three
times the amount in 2005,
according to Structured
Retail Products Adviser
(SRPAdviser).
l What to watch for
But as Gadd points out,
there are pros and cons
with structured products.
On the plus side, the
risk and return characteristics
are known from the
start – unlike a unit trust
– while investors may also
benefit from a guarantee
that their original capital
will be returned at the end
of the investment period.
The flipside is that they
can be locked in for a
given period that may not
be desirable, depending on
market conditions, while
the reliability of the guarantees
will largely depend
on the credit worthiness of
the counterparty involved.
Then there are ETFs.
Nicholas Brooks, head of
research and investment
strategy at ETF Securities,
says there are plenty of
reasons why investors
should consider such products
and predicts demand
for them will increase over
the coming years.
“It is easy to construct
a portfolio of ETFs with
just a few low-cost transactions,”
he says. “People still
tend to focus on the actively
managed funds because
there is such an infrastructure
pushing them.”
ETFs are not immune
from market problems. A
large number of exchangetraded
commodities (ETC)
offered by provider ETF
Securities were temporarily
suspended from trading on
the London Stock Exchange
due to the near-collapse of
AIG in September.
Even so, a potentially
good mix for investors is
to have exposure to both
ETFs and equities, suggests
Darius McDermott, managing
director of Chelsea
Financial Services, citing
the Marlborough ETF
Commodity Fund as a
good example.
Top 5 commodity and natural resources funds – 1-year performance
l Where to from here?
So how do investment
managers see the future
for commodities? Alex Lyle,
manager of Threadneedle’s
Global Equity & Bond
Fund, has a smaller exposure
to commodities than
in the recent past but
he remains broadly upbeat
about the prospects for
the sector.
“We have seen quite a
bit of selling of commodities
over the short term,
partly because hedge funds
have been liquidating their
investments,” he says. “But
we expect prices to remain
reasonably firm as there
are significant supply con-
Size Base 1-year 1-year 1-year 1-year 1-year Launch Dom M’star
(£m) curr return alpha beta Sharpe Sortino date rating
Marlborough ETF Commodity A Acc 7.04 £ 19.77 27.3 0.52 -0.31 -0.43 25 Jul ’06 UK –
Lehman Brothers Comm Plus Inst’l � Acc 61.74 � 7.95 1.9 1.11 -0.14 -0.3 15 Mar ’07 Ireland –
Investec Glbl Commodities and Res C Grs 100.48 $ -0.83 n/a n/a -1.14 -1.14 31 Jan ’07 Guernsey –
MS INVF Commodities Alpha Plus A Acc 61.81 $ -5.94 4.20 1.06 -0.78 -0.86 6 Jun ’07 Lux’bourg –
UBS (Lux) SS-RICI (£) Inc 6.44 £ -27.76 -12.92 1.26 -1.16 -1.03 4 Aug ’06 Lux’bourg –
Source: Morningstar
DECEMBER 2008 [www.portfolio-adviser.com] PORTFOLIO ADVISER
INVESTMENT STRATEGIES COMMODITIES
Commodity funds vs index – 3-yr p’mnce
%
80
60
40
20
0
Commodity & natural resources funds
-20
Nov ’05 May ’06 Nov
Source: Morningstar
straints, at the same time
as strong demand with the
Chinese economy looking
pretty robust.”
Whichever option you
choose, it is worth remembering
that commodity
investing should come with
a health warning attached
for both investors and their
advisers, adds Gadd. He
MSCI World
May ’07
Nov
believes it is important that
everyone knows the risks.
“We are talking about
the most volatile asset
class there is,” he says. “If
you take a long-term view
or purchase a structured
product you can potentially
ride out this volatility,
but it may still prove to be
a bumpy journey.”
May ’08
Nov
“ It is easy to
construct a portfolio
of ETFs with just
a few low-cost
transactions. People
still tend to focus on
the actively managed
funds because
there is such
an infrastructure
pushing them
”
Nicholas Brooks, head of
research and investment
strategy, ETF Securities
25
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