In addition to these traditional raw materials, a broader range of resources such as uranium, rare earth metals, lithium, cobalt, and iron ore can also be considered.
Securing the EU in minerals and rare earths by 2030 seems out of reach.
Actions and derivatives products
How to invest in this sector? “You can invest through actions related to these sectors, but you can also integrate a strategy that allows for low exposure in forward contracts or derivative products,” explains Robert Shimell, Portfolio Manager on the Diversified Alternatives Team at Janus Henderson. “You can then build a long/short strategy that also hedges against downturns. Our approach offers exposure to around 30 liquid and exchange-traded commodity futures contracts, covering a wide range of commodity markets. For example, Brent crude oil, natural gas, copper, gold, wheat, cocoa, etc. These futures contracts are traded in the United States and the United Kingdom.”
The strategy is not intended to predict or foresee geopolitical events. It is designed to adapt to market trends and price fluctuations that may result from geopolitical developments, supply disruptions, or other shocks.“
As seen recently, geopolitics significantly impacts these vital sectors for the global economy. Can we protect ourselves against these kinds of risks?
“The strategy is not intended to predict or foresee geopolitical events. It is designed to adapt to market trends and price fluctuations that may result from geopolitical developments, supply disruptions, or other shocks. Long/short derivative products allow the portfolio to adjust its positioning as trends emerge, while the combination of futures contracts and stocks aims to ensure resilience during periods of increased geopolitical tensions and market-related tensions due to events,” adds Robert Shimell.
Inflation and ESG
Raw materials can offer diversification benefits because their return factors often differ from those of traditional stocks and bonds. They can also generate high returns during periods of high inflation, while stocks and bonds may face challenges.
When investing in commodity-related assets, it is neither realistic nor necessarily advantageous for investors to avoid all ESG risks.”
In these types of sectors, however, a series of environmental and social questions arise. How can we protect ourselves against these risks? “When investing in commodity-related assets, it is neither realistic nor necessarily advantageous for investors to avoid all ESG (environmental, social, and governance) risks. As asset managers, our responsibility is to identify, assess, and manage these risks, prioritizing companies that demonstrate higher standards and credible improvement over time, while avoiding those that pay little attention to ESG issues. In some cases, we engage with companies recognizing that ESG changes often require active management rather than a simple divestment policy,” acknowledges Robert Shimell.
The fund managed by this manager invests, for example, in companies such as Anglo American (mining), Cameco (uranium), Chevron Corp (oil and gas), Deere & Co (agriculture), Ivanhoe Mines (copper), Newmont Corp (gold mining).
When investing in a commodity-related fund, you are inevitably invested in sectors that are somewhat more controversial from an environmental perspective.
It should be noted that in this type of investment, a knowledgeable investor is worth two: by investing in a commodity-related fund, you are inevitably invested in sectors that are somewhat more controversial from an environmental perspective.
Each investor has their own management style.
