world is only at the start of a “super cycle” that could see commodity prices trend upwards for, he says, “100 years, maybe even 150”.
Once you reove the parasites living off the blood of the zebra, things looking up.
Note Luland and the Chinese going to Africa and fudning them so that they do not have to go to the IMF and World Bank to be skinned alive.
TJ, might be satying:
Bloody Elmat! I have just shifted the Collapse a bit and Elmat tells me aganin we are beyond collapse!
Boom that could last 100 years
In the first of a series of interviews with managers who have tripled investors’ money, our correspondent talks to a resources guruKathryn Cooper
ONLY a handful of managers have succeeded in gaining entry to the 200% club, and over the next few weeks we will be talking to them to glean the secrets of their success and their views on the market.
To join the elite group, managers must have delivered returns of more than 200% over the past five years according to data firm Citywire. Where they run more than one fund, their average must be more than 200%.
First up is Ian Henderson of JP Morgan Asset Management, with an average of 261%. His £1.4 billion Natural Resources fund is up an astonishing 500% over the past five years, according to Citywire, and is the best performer out of about 2,000 funds over that period. His Global Financials fund has also more than doubled investors’ money.
Henderson is a City blue-blood. His great-grandfather, Lord Faringdon, founded Henderson Administration, later Henderson Global Investors; the family also set up stockbroker Cazenove.
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Should you take a chance on resources?
“It’s like coming from an acting family; it’s natural to follow the line. I was investing from a very early age,” he said.
He firmly believes that the world is only at the start of a “super cycle” that could see commodity prices trend upwards for, he says, “100 years, maybe even 150”.
Unsurprising for the manager of a commodities fund, perhaps – except that he has been investing in the sector since starting in the City in the 1970s, and he took over the reins of the JPM Natural Resources fund, which has been running since 1965, in 1992, when commodities were deeply unfashionable. We talk to him about the outlook for the sector:
Why did you want to run a commodities fund, especially in the 1990s?
The fascination with resources was that it is one of the few areas where you can make significant returns over short periods of time by virtue of overall changes in economic circumstances, and through new discoveries.
In a sense it is similar to technology, where something like the internet can be transformational. With a resource company, you can achieve a similar sort of transformation through a discovery.
As with tech, though, aren’t we now seeing a bubble?
The difference is that in the tech bubble of the late 1990s to 2001 the earnings were very putative, they were a long way into the future, whereas today the earnings are very visible and immediate.
The internet has ultimately changed people’s spending behaviour, their way of doing business, and when people latched on to that they were latching on to something real – even if they got ahead of themselves.
I have believed for a number of years, long before China began to emerge as a voracious consumer of commodities, that it was going to be as significant as the internet was for tech. I have been surprised that it’s only in recent years that people have begun to recognise China’s importance.
The investment community and the mining community were in denial for a number of years, and to a degree still are, about what is happening and what is sustainable. Everyone has seen boom and bust for so many years that people can’t believe the good times can last.
The transformational event for me was the fall of the Berlin Wall. The ending of the Cold War brought about a change in the allocation of resources away from defence and protectionism towards commerce. That change in focus helped to allow for the accession of China to the World Trade Organisation in 2001 and that was the biggest single event for the commodities world.
That China could attract foreign capital and export freely has meant that a nation that was in the dark ages for 60 years was suddenly accepted as a trading partner, and that opened up huge possibilities.
But hasn’t the sector got too hot in the short term?
I don’t believe in the short term; I think it’s the wrong way to invest. We have suddenly multiplied the consuming population by four or five times by having this open world. This process won’t play out for 100 years or maybe 150 years.
Where do you see the oil price going?
The only reason the oil price would decline would be a substantial increase in supply. At the moment, the slack within the system is about 2% of world demand, which is so skinny that I just don’t see it happening.
Why is the high oil price not causing as much pain as it did in the 70s?
As a proportion of gross domestic product, energy consumption is much lower and is likely to remain so because the service sector has become so much more important. The price has almost no impact in Europe; it’s irrelevant. Most of it goes to the chancellor. You could double the oil price and it would make very little difference at the pump.
Where I have a worry, however, is in the emerging markets, where prices per gallon are a tenth of what we pay here. But it’s not a big concern if you think about what is happening in the Middle East. The amount of wealth that has accrued to some of the oil states is phenomenal.
How do you play the oil price when firms like BP are in such difficulties?
I have a problem with large companies because the prospect of their market value going up is remote. The companies that can be transformed are those that are successful at exploration, which can mean striking deals with companies in countries you might be anxious about, but risk-taking there can deliver returns that are transformational.
One of our biggest positions is Fortescue Metals, which has developed an iron ore deposit in Australia that has turned the company into a multi-billion dollar business from nothing in about five years.
Another of my big holdings is First Quan-tam, which is becoming one of the world’s major copper producers from its operations in Zambia and the Congo. |
