Finland’s ICECAPITAL Commodity Fund tops league tables – 04/08/2011/Reuters
Energy tilt boosts top performing funds in Q1
LONDON, April 8 (Reuters) – Commodities fund managers who performed well in the first quarter via a tilt to energy are sticking with oil futures in the second quarter but are more cautious on industrial metals as China tries to cap growth.
The ICECapital Commodity Fund LP65011880, which topped a Lipper performance league table of more than 100 actively managed commodity funds, and the Swiss & Global JB Commodity Fund LP65022859, which came seventh, are both favouring energy and gold into the second quarter, with industrial metals seen as more vulnerable to a correction. PIMCO’s $979 million CommoditiesPLUS Strategy fund LP40183159 came second and the hybrid futures and stocks World Commodity Fund LP40113821 came third. “Japan will need to import more industrial metals to help for reconstruction in the region of Tohoku,” said Fabien Weber, manager of the JB Commodity Fund, which was up almost 10 percent in the first quarter. “Nevertheless the surge in demand will not be enough in my opinion to alter the negative impact of China slowing down its imports and so the fund is underweight.”
Mikael Simonsen, chief investment officer of Finland-based ICECapital Asset Management, is also mindful of the fact that demand for industrial metals is very sensitive to global growth. Both managers attributed their strong performance in the first quarter to an overweight in energy versus their benchmarks, particularly Brent oil. This gained a near-record $22 a barrel in the quarter, whilst U.S. crude lagged due to high stockpiles at key delivery point Cushing, Oklahoma. “As there are no easy ways to transfer oil far south from Oklahoma, the Brent contract was the one that had the most upside potential as a hedge against geopolitical unrest,” said Simonsen. The fund used almost half of its risk budget on an overweight to Brent versus U.S. crude, he said.
A survey of investors by Barclays Capital found 28 percent thought crude oil would be the best performer in 2011. Jim Llewellyn, manager of the World Commodity Fund, cited a focus on energy, gold and iron ore as helping performance in the first quarter. “Western Refining was our best performer,” he said. “The industry as a whole was severely depressed coming into the summer of 2010 … Now margins are very healthy.”
Weber also highlighted an overweight to corn and underweights to U.S. natural gas and zinc, whilst Simonsen’s fund benefited from tilts to cotton and corn, he said. The oil price has benefited from concerns about supply disruption due to Middle East unrest in the last three months, and both managers are sticking with their energy overweights, but Simonsen is becoming a little more cautious. “Our assessment is that commodities as a group might have some headwinds as we enter the last phase of the cycle,” he said. “It is of course very difficult to call the top of the cycle so we will adapt some dynamic hedging strategies. “He described the outcome for several sectors as “binary” with the energy sector likely to correct if there was a peaceful resolution in the MENA region.
Weber still sees some supportive factors for energy, with Japan needing to import more crude oil and refined products to compensate for the loss of the electricity that was generated by nuclear power following the earthquake last month. The average actively-managed commodity fund in the Lipper Global Commodity sector was up 4.42 percent in the first quarter.
The worst-placed funds were the Loewen IF-Commodities fund, which was down over 5 percent and the Prifund Global Gold and Precious Metals fund, which was down 4.04 percent, according to Lipper data.
Gold and precious metals experienced strong outflows in January and the first half of February as investors developed more risk appetite. Both funds are up on a 12-month basis. (Editing by James Jukwey).