Better insight + Better process = Better results JPM Natural Resources Fund Ian Henderson, Fund...
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ter insight + Better process = Better results JPM Natural Resources Fund Ian Henderson, Fund Manager October 2007 For professional advisers only.
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Transcript of Better insight + Better process = Better results JPM Natural Resources Fund Ian Henderson, Fund...
Better insight + Better process = Better results
JPM Natural Resources Fund
Ian Henderson, Fund Manager October 2007
For professional advisers only.
2 Better insight + Better process = Better results
What have we done? Has it worked? Will it work in the future?
2
3 Better insight + Better process = Better results
Our building blocks
Understand the clients’ needs
A professionally managed fund
A portfolio that beats the market
Trustworthy investment professionals
Ability to deliver
Understand our strengths and our weaknesses
Knowledgeable in our specialist subject
Expertise
Be able to identify companies with strong growth profiles and reliable management
4 Better insight + Better process = Better results
Flexible asset allocation captures the best of the sector
JPM Natural Resources Fund - as at 30 September 2007
… and can offer intrinsic natural diversification benefits
JPM Natural Resources Fund - as at 31 December 2002
Energy24%
Base Metals
and Diversified
34%
Uranium4%
Diamonds and Other
7%
Gold and Precious metals28%
Cash3%
Energy24%
Base Metals
and Diversified
23%
Cash0%
Diamonds and Other
3%
Gold and Precious metals50%
5 Better insight + Better process = Better results
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A$
Fortescue Metals
Source: Bloomberg, AUD, 30 September 2007
Bulk Commodities: Converting a good story into a potential best seller!
Produces and exports high grade iron ore to the Chinese market
Stock price advanced on achieving financial support
Began building up position in
Fortescue Metals
10,700% increase!
Fortescue Metals: Iron Ore producer
6 Better insight + Better process = Better results
Source: Datastream, USD, 30 September 2007
Prices rebased
Oil shares can rise without help from oil price
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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
DS World Oil & Gas Crude Oil-WTI
7 Better insight + Better process = Better results
Source: Petrobank
Being stock selective can fuel spectacular returns
A revolutionary new combustion process discovered in 1993
Is continually advanced through numerous repeatable physical model laboratory runs and successful field scale numerical simulation models
Potential for higher resource recover, lower costs, and lower environmental impact
Petrobank - Technological advances are key features of successful companies
THAITM Process
8 Better insight + Better process = Better results
Small to mid-cap bias – offers superior performance
Invest in companies from discovery to reserve definition…
… and ultimately to production
Invest in pre-production stage companies
A nurturing portfolio with a long-term view
Example holdings %
Oilexco 1.8
Lynas Corp 0.7
Platinum Group Metals 0.4
Mintails 0.6
Berkeley Resources 0.3
Source: JPMorgan Asset Management, as at 30 September 2007
… striving to maximise returns with a focus on the undiscovered
9 Better insight + Better process = Better results
Small-mid cap price performance
First Quantum Lynas
Oilexco Petrobank
Source: Datastream, 30 September 2007
Initial investment
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Initial investment
Initial investment
020406080
100120
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Initial investment
10 Better insight + Better process = Better results
Central Asia1%
Central Africa
5%
Cash3%Western
Africa3%
South East Asia2%
Southern Africa12%
South America
6%
North America
17%North Africa
1% India2%
Kazakhstan1%
Global Diversified
12%
Russia4%
Brazil5%
Australia13%
Far East6%
Europe8%
By region (%)
Diversified geographical exposure dilutes geopolitical risks
Diversifying political risk – Assessment of location of assets is
essential
Low correlation to emerging markets– Only 3% of the portfolio in MSCI
Emerging markets Index
Source: JPMorgan Asset Management, as at 30 September 2007
11 Better insight + Better process = Better results
Performance versus other Natural Resources Funds
… consistently delivering from across the Natural Resources sector
3 mth 1 year 3 years 5 years
JPM Global Natural Resources Fund 3.4% 51.1% N/A N/A
JPM Natural Resources Fund 2.1% 49.9% 167.1% 433.0%
First State Global Resources 13.1% 59.6% 162.0% N/A
M&G Global Basics Fund -2.4% 21.5% 102.1% 196.9%
Merrill Lynch World Gold 21.1% 30.5% 93.0% 147.8%
Merrill Lynch World Mining 15.5% 72.1% 209.1% 410.0%
Merrill Lynch World Energy 5.8% 27.2% 101.6% 176.8%
Carmignac Commodities 10.6% 53.9% 158.0% N/A
Source: Micropal, as at 30 September 2007. Past performance is not a guide to the future.
In €
12 Better insight + Better process = Better results
Commodity Prices are holding up
Source: Datastream, USD, 30 September 2007.
Prices rebased
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Au
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Oil Gold Base Metals
13 Better insight + Better process = Better results
Source: Datastream, USD, 30 September 2007
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DS World Oil & Gas PEDS World Mining PE
Mining and Oil shares absolute P/E Multiples undemanding
14 Better insight + Better process = Better results
Analysts continue to be conservative about commodity prices
Metals and mining price forecasts
*Reuters Poll Estimates.
**Goldman Sachs JBWere Estimates
***Bloomberg as at 30 September 2007
****Average Broker Estimates
Note: Expected prices were made in July. Actual prices are average prices. All in US$.
Expected Actual Expected Actual Expected Spot Forecast ’05 ’05 ’06 ’06 ’07 Price***2010****
Aluminum* 0.81 0.85 0.96 1.17 1.21 1.00 0.87
Copper* 1.23 1.63 1.72 3.03 3.09 3.64 1.33
Nickel* 5.90 6.76 5.82 10.66 18.60 13.83 6.10
Zinc* 0.53 0.62 0.79 1.48 1.62 1.38 0.67
Gold* 432 438 532 606 668 738 531
Platinum* 798 888 970 1143 1273 1371 983
Coking Coal** 80 125 80 115 101 140 70
Thermal Coal** 45 52 45 52 55 68 43
Iron Ore** +30% +71.5% +10% +19% +9.5% +40% N/A
15 Better insight + Better process = Better results
Minor metals attractive
Vanadium Ferro Manganese
Tantalite Molybdenum
Source: Datastream, USD, 30 September 2007.
050
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16 Better insight + Better process = Better results
Source: Datastream, USD/LB, 30 September 2007.
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MB - Uranium Spot Price
Uranium story not over
17 Better insight + Better process = Better results
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1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Inflation Adjusted Oil Price ($/barrel)
Oil Price ($/barrel)
Stripping out inflation, oil price is below prior peak
Source: Datastream, USD, 31 August 2007
Prices rebased
18 Better insight + Better process = Better results
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1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Prices rebased
Inflation Adjusted Gold Price ($/Troy Ounce)
Gold Price ($/Troy Ounce)
Source: Datastream, USD, 31 August 2007
Gold can offer its own attractions…
… stripping out inflation, the gold price is far below peak level
20 Better insight + Better process = Better results
