Although the past 12 months have seen changing economic conditions and choppy financial markets globally, the long-term investment prospects for natural resources is positive, according to Lonsec research.
The firm’s 2010 review of the natural resources segment – which encompassed 11 funds across resources in the energy and metals sector, commodities and agribusiness – indicated the universe of funds in this sector is expected to grow into next year’s review cycle.
“The sector has gained momentum in recent years due to several fundamental factors on both the supply and demand side,” Lonsec natural resources investment analyst Richard Ellis said.
“Developments in this sector have been underpinned by increasing public awareness of global population growth, trends in urbanisation and industrialisation, and climate change issues which are driving companies to capitalise on developments in food productivity, carbon, water, energy and renewable energy.
“With the United Nations predicting a 33 per cent increase in global population to 9.1 billion in 2050, Lonsec expects an overwhelming increase in global demand for infrastructure and foodstuffs, which needs to be produced from finite resources.”
Lonsec said it has observed investment management firms respond to demand from sophisticated investors and financial advisers by developing new investment products which are active in the natural resources space.
Ellis said the products which have emerged are diverse in their investment strategies, although they share a common philosophy in that long-term opportunities exist in the natural resources sector, underpinned by increasing global demand.
Lonsec’s annual review of the sector awarded its top rating of “highly recommended” to two global equity funds – the Colonial First State Global Resources Fund and the Colonial First State Global Resources Long Short Fund – and to one Australian equity fund, the EIM Emerging Resources Company Share Fund.
