Andy Parsons, advice team manager at The Share Centre, explains how investors seeking exposure to global resources could benefit from the JP Morgan Natural Resources fund.
"It will not have escaped the attention of most investors that throughout 2010 the price of gold rose significantly, continually hitting new all time highs. Albeit there has been some pull back during the start of 2011.
"When investors choose to invest in natural resources, the first decisions they need to make is whether they wish to invest indirectly via companies involved with the overall operations or directly via the physical commodities themselves.
"This fund invests in a diversified portfolio of companies with exposure to global resources and energy. As a result it tends to have a higher degree of liquidity than a direct investment within the physical product and all the associated costs of storage, transportation and insurance. Gaining exposure to resources through a fund constructed in this manner ensures that your returns are not only reliant on demand for natural resources, but also the management of the company mining or managing the raw materials.
"Ian Henderson manages this fund, investing across energy, gold and precious metals, base metals and other commodity related areas. Investments tend to have a bias towards small and mid-cap companies, and aim to help reduce market volatility by holding between 250-300 companies. Ian aims to invest in companies throughout their life cycle, from discovery, pre-production to reserve definition.
"This fund is suitable for investors seeking exposure to global resources and who are comfortable with the risks associated with investing in overseas markets. We also recommend that as a sector based fund, it should not make up a large proportion of an investor's portfolio.
"In terms of performance, up until 9 May 2011 the fund has returned 20.7% over a 3 year cumulative period and 63.4 % over a 5 year cumulative period."
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