[miningmx.com] – Investors banking on an across-the-board rise in commodity prices this year are setting themselves up for a fall and they should instead be actively managing for winners, Investec Asset Management said.
After several years of commodity prices moving largely as one, Investec’s co-chief investment officer Mimi Ferrini looks favourably on active strategies that are bullish on natural gas and crude oil, while playing the interaction between the asset class and related equities, like gold mining companies.
“… I think you need an investment approach where you can take long or short views on which commodities are going to rally and which are going to be under pressure,” Ferrini said, arguing there are flaws in a purely index-driven approach.
He highlighted silver and natural gas as commodities likely to go higher, while soft commodities look overvalued.
Investec, winner of Lipper’s 2010 UK Best Fund Group Overall -Large award, manages close to $80 billion in assets and is owned by parent Investec Group, South Africa’s fifth-largest bank.
Ferrini said investors in 2011 should also buy into funds that invest in equities set to gain from commodity price changes, citing gold mining firms as the best example.
“The true value is not in the gold price, it’s in the gold shares and the leverage of the higher gold price is yet to come through to the earnings of some of the miners,” he said.
Among the fund’s stellar performers last year were its range of fixed income bond-linked funds, for which it also collected the Lipper 2010 Bonds House Award.
Emerging debt
Investec’s contrarian fund range, which buys into unloved stocks that have fallen at least 60% over a two-year period, was also an area where the group performed well in 2011.
“(Fund managers) are looking for companies where investors have capitulated and have sold down the shares in an indiscriminate way. So when BP sprung a leak in the Gulf of Mexico…a stock like that would be interesting for them,” Ferrini said.
However, he admitted that the strategy, which made just five trades last year, can underperform when markets rally strongly.
Ferrini said emerging market debt is an area ripe for providing strong returns in 2011, in contrast to emerging equity, which is starting to overheat.
“The yield differential between global emerging market debt and developed market debt is still very attractive for investors. People are coming round to understand that these sovereigns are financially sound and that those yields are sustainable.”
Ferrini cited South East Asian and Latin American countries as the most attractive debt issuers at the moment.
