Bestinvest says
This is an interesting and unusual fund which offers investors exposure to commodities with lower levels of volatility than its peers. The managers have a very broad investment mandate, including using derivatives, and they use these powers to reduce the variations in returns. The mixture of equity and derivative exposure is surprisingly rare in the commodities space and since launch the fund has broadly achieved what the managers have been aiming for.
This fund aims to achieve long term capital growth primarily through investment in equities issued by companies around the globe that are expected to benefit from a long term increase in the prices of commodities and natural resources, and in commodity derivatives. The Fund can invest across the entire spectrum of resource equities including metals, mining, energy, soft commodities, agriculture and related industries. Equity investments are screened with an initial focus on 5 characteristics: earnings estimates, capital management, valuation, asset quality and momentum.
Commodity derivative exposure is via Exchange Traded Certificates and Exchange Traded Notes - both of these are unsecured and the risk is related to the issuing house. The managers hedge this exposure using swaps and maximum exposure to any individual house is 10%.
The managers also run a global resources hedge fund at Investec and, whilst Enhanced Natural Resources is not an absolute return fund, it does have the ability to go short.