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• JPM
Natural Resources Fund allows investors to
access the potential long-term uptrend in global
natural resources
• Focuses on uncovering developing natural
resources companies
• Effective diversification within a portfolio as low
correlation with other asset classes
• Highly diversified – investing in gold, mining and
energy sources
• Highly respected and successful manager
Diversify your portfolio.
The JPM Natural Resources Fund
provides a simple and effective means
to add diversification to your portfolio. Not only does the fund
invest in markets and stocks that are
unlikely to be held in a core global equity
portfolio, but because the natural resources
sector is often driven by
different factors from those driving
other sectors, the fund also tends to
demonstrate a low correlation with the rest of
the market.
Furthermore, the fund itself is well
diversified across the natural resources
sector, investing in a wide range of companies
spanning base metals, energy extraction, and
gold and other precious metals. Usually
the fund holds
around 150-250 stocks to minimise stock
specific risks.While it’s important
to recognise that natural resources
markets can be volatile, it is equally
important to point out that the fund gives you
access to the very
best investment opportunities in the sector
through a highly diversified portfolio.
Mining new potential
Many of the best opportunities in the sector
lie in the small and mid-cap areas of the
market. Smaller companies are less well
covered by broker research,
which produces more undiscovered
opportunities.JPMorgan look for companies
in the discovery, exploration, or early
production phases of development, as
well as more mature companies which are
undervalued.
The JPMorgan investment approach has its
emphasis on bottom-up stock picking
which has proved consistently successful.JPMorgan
are confident that their experience and
expertise, backed by research from across
JPMorgan Asset Management’s regional
investment teams, can continue to uncover the
best global natural resources
opportunities.
An experienced fund manager
is crucial
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Ian Henderson, the
fund manager of the JPM Natural
Resources Fund, is one of the most
respected investors in the natural
resources sector.With over
25 years’ experience in natural resources
stocks, Ian has managed this highly
successful fund since 1992, since when
he has consistently uncovered
the very best opportunities in the
sector.
“We
are seeing a transformational event
in the demand and supply
dynamics of the natural resources
sector which should help drive share
prices higher for years to
come.”
Ian Henderson, Fund Manager,
JPM Natural Resources Fund. |
Capitalise on long-term structural change
The JPM Natural Resources Fund
is positioned to benefit from one of the great
investment themes of our age – the rapid industrial development of
emerging powerhouse economies including
China, India, Brazil and Russia. This development
is having a colossal impact on commodities, such as
copper, oil and diamonds.
Copper: Chinese demand is insatiable
As the graph below shows, despite significant
discoveries of new copper reserves,
demand pressure from industrialising countries
has dominated the copper
market over the last 125 years.
Today, it is demand from China that is driving
prices higher. In the last ten years alone,
China’s demand for copper has more than
doubled and this demand
is set to rise even higher. This is because
China’s economy is developing at an
unbelievable rate. Over the next ten years,
China has plans to build 20
regional airports and two high-speed
rail networks as well as a huge expansion to
its electricity network which will span the
entire country from east to west.
This last project is the equivalent of
building a network the size of the UK’s entire
national grid each year for the next ten
years.
50 years ago, the industrialisation of Japan
had a massive impact on copper demand,
resulting in price strength for many decades.
But compared to China,
Japan is smaller, both in terms of land
area, China is geographically 25 times bigger
than Japan, and in terms of population, China
is ten times bigger.
Considering China has so far only taken a few
steps along this historic path, copper prices
may still be a long way from their peak
Oil: Consumption is simply
outstripping supply
Global demand for oil is growing by over three
million barrels per day, driven by the rising
energy demands of China, India and other
rapidly industrialising economies. Years of
underinvestment in exploration and
refining capacity, as well as dwindling
physical reserves, means that there is a
growing gap between oil discoveries and
consumption.
Environment factors, such as Hurricane Katrina
which wiped out oil production in the Gulf of
Mexico last autumn, are also having a severe
impact on supplies, while oil output
from the Middle East has yet to recover from
the 1990 Gulf War, not to mention the
detrimental impact
on production of the 2003 Iraq conflict. As a
result, spare capacity is no longer available
to cushion spikes in demand and we therefore
expect oil prices to remain strong for
years to come.
Just take a look at the facts: No major oil
field has been discovered since the 1960s.
No new oil refineries have been built
in the US for over a generation.
Delivery is also under pressure, as oil tanker
capacity peaked in the late 1970s.
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Case study:
Diamonds
Diamonds have always been coveted for jewellery, and
nowadays are used heavily in
industry. The price of this most precious of gemstones
is being boosted by growing
demand from China and other emerging
markets.
It’s often said that diamonds are a girl’s best friend. And
Chinese women
are no different, with eight out of ten brides in
Shanghai demanding a
diamond ring in 2005 according to a recent survey.
Current demand is only the
tip of the iceberg – in years to come, as
China develops and more
Chinese can afford luxury goods, China is
expected to become the
world’s biggest jewellery market.
As a result of these huge new diamond markets and due to the
fact that
the production of diamonds is expensive and
difficult, current diamond
output is struggling to keep up with growing demand.
With diamond exploration full of uncertainties and new
discoveries few and far between,
diamond supplies are not likely to increase materially
in the short term. The JPM
Natural Resources Fund, which has the
flexibility to invest
wherever the greatest opportunities lie in the
natural resources sector,
is well positioned to capitalise on these compelling
opportunities. |
Portfolio balancing
One of the fundamental
rules of sensible investing is to make
sure that an equity portfolio is
sufficiently diversified. However, because
globalisation has led to different
geographical markets becoming increasingly
intertwined, it’s become more difficult to
achieve this simply by
balancing investments across stock
markets.
JPM Natural Resources Fund provides a
solution to the diversification puzzle.
Because natural resources stocks are
driven by different factors from those
affecting the behaviour of the broader
equity market. For example, take gold.
Investors often turn to gold as a ‘safe
haven’ and store of value in times of
political and economic uncertainty. This
can help to boost the share prices of the
major gold mining companies, even
if the overall market is falling.
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