The Fund's investment objective, over a recommended investment period of more than five years, is to outperform its benchmark index, with exposure to commodity and energy-linked stocks.
March was marked by a return of volatility to oil prices. While this had been kept within in a narrow range ($55-57/bbl for Brent) since the Opec/Non-Opec pact, prices fell to $50/bbl before closing the month near $53/bbl. Concerns about the increase in US crude oil inventories and Opec's ability to hold and renew its reduced production commitments have led traders to unwind their net long positions. These reached a record level, and the correction had the advantage of cleaning up the market. We remain constructive about oil prices. The rise in oil stocks is linked to seasonality, and the quota compliance rate (94% in February) shows the willingness of both Opec and non-Opec countries to reduce the global excess of stocks. In addition, US production finally rose by 60,000 bbl/day in January, while weekly statistics predicted growth of 178,000 bbl/day, a level that could easily be absorbed given the growth in demand. Gold prices remained stable at around $1,249/oz, and were not affected by the 25 bps hike in US interest rates. Copper prices fell slightly with normalisation underway at Grasberg and Escondida. In an environment where the underlyings came out were slightly lower, the fund fell further and underperformed its benchmark. The correction was more pronounced in the Mining & Metals and Exploration & Production sectors, as well as Oil Services sectors in which we are overexposed (59% when combined against 41% for the index). This is the result of our belief in their ability to significantly raise their cash-flows in 2017. Accordingly, over the month the strongest negative contributions came from Anadarko (E&P), Patterson-UTI and Halliburton (oil services), plus Lundin Mining (copper). For its positive contribution, note the performance of Ivanhoe Mines, which has significantly increased discoveries on the Kakula Project (DRC), and could make its mark in the history of copper. Teck Resources and South32 have been taking advantage of the rebound in metallurgical coal in the wake of Cyclone Debbie in eastern Australia. We take advantage of the markets to reinvest.
(1) The rating grades the funds on a scale from 1 to 7. This rating system is based on the average fluctuations of the net asset value over the past five years. It corresponds to the variation range of the portfolio upwards and downwards. If the net asset value is less than 5 years old, the rating is determined by other regulatory calculation methods. Historical data such as those used to calculate the rating may not be a reliable indication of the future risk profile. The current category is neither a guarantee nor an objective. Category 1 does not signify a risk-free investment.