By MARCEL PORCHERON 08/01/2009
In 2008 a large allocation to basic materials and oil & gas in this fund backfired and did much to harm the fund’s performance. In the year to December 2008 the fund declined 50.5%, 16% behind the index. We are disappointed that the managers of this fund did not reduce their resources exposure more aggressively (now 34%). Clearly the joint management of the portfolio is not having the desired result.
The fall in the value of the listed shares in the fund has led to a situation where un-quoted companies account for more than 10% of its value. Vostok Energy alone accounts for 10% of the fund at current valuations. In current conditions liquidity and fair value of such holdings may be suspect.
The managers have significant personal commitment to the fund so we believe that their interests are strongly aligned to those of unit holders. The best possible outcome for holders of this fund is a sustained recovery in the value of its listed resource holdings before the managers can refocus on their favoured companies. In the long term Mark Niznik in particular prefers companies which have strong balance sheets, good cash generation and visible earnings.
Downgraded to 2 stars.