Commodities

Intermediaries to increase client exposure to resources and commodities, says Barings

Nearly two in five (38 per cent) intermediaries believe their clients should increase their exposure to natural resources and commodities, according to the latest Baring Asset Management Investment Barometer. 

This represents a significant increase from the last barometer, where a quarter (25 per cent) backed an increase in exposure, and is the highest for almost three years.
 
The Barings research, which canvasses UK financial advisers, found that one in six (16 per cent) intermediaries are ‘very favourable’ towards natural resources/commodities – up from just six per cent in the last barometer.  More than half (53 per cent) said they were currently ‘favourable’ towards global resources and commodities.
 
When asked about the biggest global macro-economic challenges to growth in the next six months, just one in ten (11 per cent) cited supply and security of global resources. 
 
Duncan Goodwin, head of global resources at Barings, says: “We believe the outlook for the global resources sector remains positive, with a number of short and longer term drivers supporting the asset class.  At this stage of the economic cycle, we believe valuations for resources companies are highly attractive, as they are trading below historical levels and look set to revert to their long-term mean.
 
“On a longer term basis, population growth will continue to drive absolute demand for natural resources, with the growing global population’s needs for energy, foods and other raw material inputs sustaining an ever rising need to boost production.”
 
Barings has been investing in resource-related equities for nearly 20 years and manages more than USD900 million in a range of different strategies in the asset class.  Recently it has put more emphasis on the bottom-up element of stock selection and increasing the level of stock conviction in the Baring Global Resources Fund.
 
Goodwin says: “The commodities ’super cycle’ is still with us, but it has evolved. Resource equities retain a valuable role in investment portfolios.  As commodities prices are closely correlated with rises in consumer prices, investment in the resources sector has the potential to act as a hedge against inflation.  Rising prices might not be seen as a major concern at the moment, but it is undoubtedly a risk and something to consider for long-term portfolio planning.”

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