IN FOCUS
/ FUND, PENSION, TRUST /
Fund Trust
JPM GLOBAL MACRO
OPPORTUNITIES BLACKROCK
COMMODITIES INCOME IT
Source: FE Analytics
16
IT Commodities & Nat Resources (-43.27%)
-60%
-10%
-50%
-5%
BlackRock Commodities
Income IT (-33.89%)
-40%
0%
MANAGERS: Olivia Markham &
Tom Holl
DISCOUNT/PREMIUM: -2.5%
GEARING: 1%
OCF: 1.44%
FE CROWN RATING:
5%
-30%
FILE
10%
-20%
15%
-10%
IA Targeted Absolute Return (6.74%)
20%
0%
FTSE All Share (9.61%)
1 0%
Barclays Sterling Gilts (17.69%)
25%
Markham and Holl took over in
January 2014 and, while the poor
market backdrop has led to share
price falls, this has also pushed its
dividend yield out to close to 10
per cent, with revenue reserves of
1.36 years.
The board has a progressive
dividend policy – FE data shows
BlackRock Commodities Income
IT has increased its pay-out in four
of the past five years, maintaining
it in the other due to a poor market
backdrop.
Markham and Holl currently hold
40.8 per cent of their portfolio in
oil & gas stocks, 19.4 per cent in
precious metal miners and 15.5
per cent in companies involved with
basic materials. Top-10 holdings
include Exxon Mobil, First Quantum
Minerals, Royal Dutch Shell and
Newcrest Mining.
PERFORMANCE OF TRUST VS SECTOR
UNDER MANAGERS’ TENURE
30%
expectation is turning from bearish
to bullish, as is happening now in
commodities,” he explained. “Now is
the time for investors to focus on this
unloved asset class.”
For investors who share Blanning’s
view, investment trusts – which tend
to outperform their open-ended
rivals in rallying markets – may be
the best option.
One of the highest-rated of those
with a focus on natural resources is
BlackRock Commodities Income IT,
which is run by Olivia Markham and
FE Alpha Manager Tom Holl.
While the trust’s current discount
of 2.5 per cent to NAV is far narrower
than the sector average of 18 per
cent, it has traded on an average
premium of 1.5 per cent over one
and three years
The trust has also been the best
performer in its peer group since
JPM Global Macro Opportunities (27.61%)
H
aving been an area of the
market that handsomely
rewarded investors during
the 2000s, commodities have seen a
massive fall from grace over the past
few years.
Careless spending and mass
overproduction immediately prior
to China’s slowdown have meant
commodity prices and shares in
mining companies have fallen
significantly over the medium term.
Many investors continue to avoid
this area of the market, pointing out
the macroeconomic environment
remains challenging, but a number
of industry commentators now
believe the worst is over, thanks
to factors such as a rebalancing in
the supply/demand dynamic, signs
of an inflationary environment and
excessively low valuations.
Schroders’ head of commodities
Geoff Blanning recently said the
five-year run of heavy losses in
commodities appears to be over and
argued the asset class’s next bull
market has already started.
“The biggest price gains, in
percentage terms, occur at the
beginning of a bull market. And
the best (lowest risk) time to buy
anything is when the consensus
35%
MANAGERS: James Elliot, Talib
Sheikh & Shrenick Shah
FUND SIZE: £364m
LAUNCHED: 15/02/2013
OCF: 0.78%
FE CROWN RATING: N/A
PERFORMANCE OF FUND VS SECTOR
AND INDICES OVER 3YRS
FILE
lower than the figures for the FTSE
All Share and Barclays Sterling
Gilts index.
The fund aims to make a positive
return over rolling three-year
periods, in all market conditions. It
describes itself as a “multi-asset
macro thematic fund” that seeks to
capitalise on opportunities thrown up
by economic trends.
According to its latest factsheet,
the largest theme in the current
portfolio is “Europe gradual growth
recovery”, which accounts for 26.9
per cent of assets. “Low inflation”
has a 19.2 per cent allocation, “China
in transition” 14.3 per cent and
“supply side weakness” 12.4 per
cent; other themes include “Japan
beyond Abenomics”, “US economic
strength” and “emerging market
rebalancing”.
T
he uncertain environment
has led to a greater interest
in absolute return funds as
investors seek out portfolios that can
protect them on the downside and, in
theory, make a positive return in all
market conditions.
One fund in the IA Targeted
Absolute Return sector that has
established a strong early track
record is JPM Global Macro
Opportunities, which takes a different
approach from the traditional “long-
only” strategy.
The fund, which is headed up
by James Elliot, Talib Sheikh and
Shrenick Shah, has made 34.5 per
cent since launch in February 2013.
This compares with an 8.57 per cent
gain from its sector average, 15.92
per cent from the FTSE All Share
and 20.13 per cent from the Barclays
Sterling Gilts index.
JPM Global Macro Opportunities
has not had to take on an excessive
amount of risk to achieve these
gains, either. Its annualised volatility
and maximum drawdown – the
amount of money an investor would
have lost if they bought and sold at
the worst possible moments – over
the past three years stand at 5.19
per and 7.73 per cent, respectively –
This trust’s dividend yield of close to 10 per cent could make it appealing to income-
seekers as well as bargain-hunters
This fund describes itself as a “multi-asset macro
thematic portfolio” that seeks to capitalise on
opportunities thrown up by economic trends
As well as being long equities
and bonds, JPM Global Macro
Opportunities makes use of
sophisticated strategies such as
relative value, derivatives, and
dynamic hedging strategies to
diversify away from traditional asset
classes in a bid to make positive
returns in rising and falling markets.
Sheikh says a flexible approach,
such as the use of macro thematics,
can mitigate three issues capable
of causing problems for traditional
balanced long-only multi-asset
strategies.
These are the “increasingly
erratic” correlation between stocks
and bonds, falling Sharpe ratios
for a balanced mix of assets –
suggesting rewards on offer for the
given risk investors are undertaking
has declined – and high valuations
coupled with macro uncertainty,
which has dampened investor
sentiment.
“Investment strategies that are
able to capture macro trends with
a lower correlation to traditional
markets will be standouts in 2016,”
Sheikh said.
Source: FE Analytics
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