Fund of the week: A steady manager in a high-risk sector
Sep 03, 2010
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With India and China expected to dominate economic growth for the foreseeable future, demand for natural resources should remain strong, says Emma Wall in The Sunday Telegraph. One way to profit is via a fund that invests in commodity-focused stocks. The JP Morgan Natural Resources Fund is one of the best – manager Ian Henderson has more than doubled investors' money in the past five years, with a cumulative return of 115%.
Disasters such as BP's oil spill and the cave-in that has trapped miners in Chile have cast a pall over the sector in recent months. But Henderson says that he only invests in companies with a responsible attitude and a good track record. In particular, he likes Vedanta, a mining firm with projects in India, Zambia, and Australia, which is also rumoured to be diversifying into oil and gas extraction.
Of course, commodities are at the riskier end of the investment spectrum. Henderson warns investors that the path to large returns will not be smooth. "You own ten or 20 years' worth of production – although the gamble is that it still has to be produced," he tells The Sunday Telegraph. So a bad drilling result, or other production problem, can hit a company hard.
That's why it's best to diversify across a number of companies, regions and types of commodity. "Investors chasing one particular commodity over another may well get their fingers burned as this is an asset class which can be very volatile," says Adrian Lowcock at Bestinvest, who is a fan of the fund. "We continue to prefer funds that have flexible trading mandates, but recommend investors invest for the long term."
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JP Morgan Natural Resources Fund top ten holdings
| Name of holding | % of assets |
|---|
| Rio Tinto |
3.8 |
| Pacific Rubiales |
2.7 |
| Anglo American |
2.6 |
| Xstrata |
2.2 |
| Red Back Mining |
1.9 |
| Petropavlovsk |
1.7 |
| BHP Billiton |
1.6 |
| Freeport-Mcmoran Copper |
1.5 |
| Semafo |
1.5 |
| Barrick Gold |
1.4 |
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