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. Compared to more traditional equity only funds we would expect this fund to do better in volatile falling markets and underperform during strong rallies.
This fund aims to achieve long term capital growth primarily by investing in natural resource and commodities (via derivatives, mainly ETF's and Swaps). However the fund also has the ability to take short positions (benefit by the price going down). The fund manager will use derivatives mainly to manage risk, reduce volatility and benefit where they simply have a bearish view on a company or commodity.
This is an unusual structure for a retail commodity fund. The primary benefit is to give investors commodity exposure without the high level of volatility normally associated with the asset class.
The fund can invest across the entire spectrum of resource equities including metals, mining, energy, soft commodities, agriculture and related industries.
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's solvency.
Because of the unusual nature of the fund finding a difficult benchmark is difficult. We have used the HSBC World Mining as the majority of the fund is equity long only but this should only be used as a guide.