Dr Joanne Warner, Head of Global Resources, First State Investments shares 3 main reasons why Singaporeans should consider this Fund.
SBR: Please tell us more about the product.
The Global Resources team was established in 1997. Since this time we have established pooled vehicles, segregated mandates, a soft commodity equities capability and a long short capability. The team manages approximately US$ 3.5 bn in funds under management across a range of investment offerings and geographies (as at 31 December 2012).
The team invests in listed resources and energy companies globally. Resource companies are defined as those principally engaged in the discovery, development, extraction, processing or distribution of natural mineral resources. The team can also invest in companies whose main activity is the provision of services to the resources industry. Our Global Resources funds do not invest in physical commodities.
The team focuses on quality companies which are able to deliver growth and operate with relatively low cash costs. The team believes this will deliver good returns over the full commodity price cycle, without taking on excessive risk.
The First State Global Resources (the “Fund”) is suitable for investors with a longer term investment horizon, typically 5-7 years. The global resources sector is leveraged to economic growth, particular growth in emerging markets. The sector can therefore display greater volatility, relative to broader share markets, particularly in the short term.
SBR: What is significant/unique about this product?
There are three main points that differentiate our investment style and sets us apart from our competitors:
a) We do not make significant changes to portfolio positions based on short-term speculation of commodity price movements.
b) We search for the best quality companies with growth to represent each sector or commodity type.
c) We spend a lot of time visiting companies and their key assets.
The Global Resources team is one of the most experienced in the industry and represents more than 135 years of investment experience. The team draws upon an outstanding range of industry and investment management expertise including agricultural economics, finance, mining and petroleum engineering, physics and chemistry to technically and economically appraise resource projects.
As a specialist asset class within a larger organisation, the Global Resources team has access to first rate operational and infrastructure support, including extensive compliance and risk management systems.
The team is passionate about the global resources sector and First State Investments has an unwavering commitment to the asset class. This is evident from the more than 1,200 site visits undertaken in over 70 countries since inception of the funds, ensuring we have first-hand knowledge of the assets and the companies in which we invest. Hard hats and safety boots are some of our primary investment tools.
SBR: Why should investors consider investing in it?
The most important factor critical to resources is the level of demand for commodities. This demand is increasingly correlated to the development of emerging economies, most notably China, but also Brazil, India, Indonesia and Russia. The resources sector offers an alternative way of investing in the fastest growing economies in the world whilst providing some diversification benefits compared to a pure emerging markets play.
Importantly, this can be achieved whilst investing in quality companies often listed in Australia, the United Kingdom or North America with high standards of corporate governance and financial reporting. Investing in global resources via a fund also provides enhanced diversification benefits compared to investing in individual companies, even one as diversified as BHP Billiton.
The macro-economic environment of the last five years has seen the mining sector in particular fall out of favour with investors. The sell-off we have seen in recent years, particularly amongst growth companies, has created an opportunity for the longer-term investor to acquire high quality global resources companies at attractive valuations.
An uncertain economic outlook led to investment in major new mining projects being postponed and high cost operations closing in 2012. Combined with the natural decline of output from existing sources and the high cost of bringing on new supply, the long-term supply/demand balance for resources remains strong and should be supportive for the longer term commodity price outlook.
SBR: Anything you'd like to add?
The Global Resources team has implemented sustainability considerations into its investment process. Environmental and Social Governance (ESG) issues are particularly pertinent for natural resources companies due to the nature of the industry and the countries in which they operate.
The Global Resources team believes the consideration of ESG issues will lead to better risk/return outcomes for our funds, which will ultimately improve long term returns for our clients.
Through company engagement, the Global Resources team seeks to highlight areas for potential improvement, encourage disclosure on ESG issues, and commend companies that are making progress in this area. The team also seeks to positively influence companies towards ESG best-practice for the ultimate benefit of the investors.
Active ownership and engagement are among our top priorities as a fiduciary, because of the belief that there is a correlation between companies with good governance practices and strong, sustainable shareholder returns. Consequently, the Global Resources team seeks to positively influence companies towards ESG best-practice to ultimately benefit investors.
Do you know more about this story? Contact us anonymously through this link.