Each week we highlight one of the funds from our Wealth 150 as our Fund in focus. The Wealth 150 represents what we believe to be the best funds across the major sectors. This week Richard Troue, Investment Analyst, looks at the Artemis Global Energy Fund.
The fragility and security of the world’s energy supply is a long-term theme. Energy consumption is increasing. Demand from the West shows little sign of slowing, and as emerging markets develop they are becoming more energy-intensive. For more adventurous investors there could be opportunities among companies which already own resources in the ground, those which seek to find them, and those developing the technology to extract them.
John Dodd and Richard Hulf, managers of the Artemis Global Energy Fund, can invest worldwide in companies that span the entire ‘energy chain’, from oil and gas exploration, to production, energy transmission, utility providers and businesses providing sustainable alternatives to fossil fuels. It is a concentrated portfolio meaning each holding can contribute significantly to performance, though this also increases risk.
The fund launched in April 2011. Since then it has been a difficult environment in which to invest. Share prices have been driven by political machinations and fears over the global economy rather than prospects for individual companies. Over this period the fund has fallen by 4.7% compared with a fall of 0.4% for its benchmark, the MSCI ACWI Energy Index.
|March 2012 to March 2013|
|Artemis Global Energy Fund||-4.1|
|MSCI ACWI Energy||1.1|
Past performance is not a guide to future returns. Full-year performance figures not available before this date. Source: Lipper IM.
While this is disappointing, it is only over a relatively short period. The managers have recently made some changes to the portfolio which they believe will lead to improved performance, shifting away from European companies towards those operating in Asia, Africa and the Middle East. The managers see these regions as offering promising exploration and production prospects. They are particularly excited about prospects off West and East Africa where they suggest an improving political environment and more advanced technology could herald a new phase of oil production.
Key holdings include Africa Oil, a Canadian-listed company with assets in Kenya, Ethiopia and Mali. It recently saw its share price rise following positive news over its forthcoming drilling programme. The managers are hopeful they will see encouraging results over the coming year. It should be noted that companies listed in emerging markets or those with significant assets there are higher risk.
Technological advancements have also made extracting gas and oil from shale rock in the US economically viable. John Dodd and Richard Hulf have increased exposure to this theme since launching the fund. They are currently seeking companies accessing lower-cost reserves. They cite Texas-based Magnum Hunter as a company they are positive on. It is involved in the exploration and production of oil and gas across the southern United States. They are also positive on Cabot Oil & Gas which operates in the same region as Magnum Hunter, but is focused primarily on gas.
The fund has a diverse range of holdings from some of the largest energy companies in the world such as ExxonMobil to smaller companies and those not yet quoted on a stock exchange, which are a higher risk proposition than larger and listed counterparts. As the fund grew quickly from launch the managers refocused the portfolio towards larger and medium-sized companies, where the majority of the fund remains invested, as shown in the chart below.
This fund provides adventurous investors with a means to access the long-term prospects of companies in the energy sector. We believe John Dodd and Richard Hulf are talented fund managers and this fund remains on the Wealth 150 list of our favourite funds in each sector.
|Fund manager's initial charge||5.25%|
|HL saving on initial charge||5.25%|
|Net initial charge||0.00%|
|Fund manager's annual charge||1.50%|
|HL annual saving||0.10%*|