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Artemis Global Energy Fund - removal from the Wealth 150

Heather Ferguson | Wed 27 May 2015

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

The Artemis Global Energy Fund has been removed from the Wealth 150 list of our favourite funds for new investment.

The fund was added to the Wealth 150 when it launched in April 2011. With John Dodd at the helm, supported by Richard Hulf, we felt the fund's prospects were good. John Dodd manages the Artemis Alpha Investment Trust, which has had considerable exposure to the energy sector, where he proved himself as a strong stock picking investor. We viewed Richard Hulf's involvement with the fund as a further positive due to his high level of industry expertise.

Our analysis suggests John Dodd's past stock picking ability has not been successfully applied to the Artemis Global Energy Fund. From launch to November 2012, performance was broadly in line with the MSCI World/Energy Index. Since this time, the fund has consistently underperformed. This is partly due to the fund's bias to higher-risk small and medium-sized exploration and production companies which have underperformed larger oil companies (which make up the majority of the index). However, our analysis suggests poor stock selection has also materially detracted from returns over this time. The fund operates a concentrated portfolio which enables each holding to make a significant impact on returns, however this is a higher-risk strategy.

Companies operating in the energy, mining, and resources sectors, are often heavily reliant on the underlying price of commodities such as oil, gold, or iron ore. Falling commodity prices and a history of poor cost control has had a detrimental effect on company profits and the sector has encountered a torrid time over the past few years.

Companies with the best exploration and production potential, operating in stable regions, with a tight control on costs, are often best placed for profit growth in periods of price rises. They could also be well placed to offer an element of shelter from commodity price falls. Fund managers capable of identifying such companies should be able to outperform their respective peers and benchmarks over the long term. However, as our quantitative analysis of commodity-focused funds has become more sophisticated over time, it has become increasingly clear, in our opinion, that few managers in these areas have the ability to consistently add value for investors.

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Our view

While the Artemis Global Energy Fund has encountered periods where it has outperformed the MSCI World/Energy index, it has also endured periods of heavy underperformance. We have removed the fund from the Wealth 150 as we have lost conviction in the managers' ability to significantly outperform the index over the long term.

We stress the fund's removal from the Wealth 150 should not be taken as a signal to make any changes to a portfolio. Many companies in the energy, mining and resources sectors are lowly valued and any sustained rebound in underlying commodity prices could see company share prices recover, although there are no guarantees and prices could still fall further. The Artemis Global Energy Fund, similar to many specialist funds, is an effective way to access a niche area. Other alternatives include ETFs.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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