There might be light at the end of the tunnel, but it ain’t here yet.
Nimble Natural Resources funds drag sector skywards
Funds majoring on energy stocks have electrified the sector over 12 months, while mining has kept the performance of some big funds underground.
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After a decade left withering on the vine, Equity – Natural Resources funds are back on investors’ radars. Inflows into the sector amount to just over $500m in the year to the end of July. This is not insignificant given the sector’s total assets are $16.7bn.
That said, it could have been higher. The $560m inflow is arguably short of expectations. After all, there have been significant swings in commodity prices. These were first driven by supply constraints, then they were exacerbated by the war in Ukraine. The explanation is that the sector has two diverging stories: energy and mining. As the chart below shows, some of the sector’s biggest funds fall into that latter category.
Amplify observations
- Performance: there is a clear division between funds with energy in their remit and those focused on mining stocks. Those with energy allocations have performed the best and, in the main, taken the most money.
- The $440m Ninety One GSF Global Natural Resources and $430m BGF Natural Resources Growth and Income funds top our chart, with strong returns and high flows. They took $110m and $237m, respectively, over the period.
- JPM Natural Resources ($1.2bn) is also in this camp, with strong returns and a sizeable energy allocation. Over the 12 months, the UK version of the fund took in net new money to the tune of £130m – a rare piece of positive news for a fund that once dominated the space but has been hit hard over the past decade.
- Pictet Timber stands out: with inflows of $205m, it has grown to become the sector’s second-largest fund. However, returns for timber and forestry have been poor relative to broader resources plays.
- BGF World Mining is the sector’s largest fund by a margin, with $5.1bn equating to a 30% market share. However, as the name suggests, its focus is on mining, and performance was in the fourth quartile over the past year. The resulting outflows have been huge, at $1.1bn.
- If BGF were excluded, the sector’s inflows would be $1.7bn over the period. That’s around 10% of the sector’s current total AUM.
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