24 February 2021
Amati is pleased to announce the launch of the ‘TB Amati Strategic Metals Fund’ (‘the Fund’). Investing in a broad range of metals, unlike the solely precious metals focused funds available to UK investors, the active, high conviction fund creates a fresh and exciting opportunity for those looking to include in their portfolios exposure to both precious metals as a store of value and the metals which will be required to facilitate the transition away from dependence on fossil fuels towards a net zero carbon world.
The Fund seeks to deliver long-term capital growth by investing in a well-diversified portfolio of internationally listed metals and mining companies – listed in London (FTSE, AIM), US (NYSE, Nasdaq), Canada (TSX, TVE, VSE) and Australia (ASX), and whose primary revenues are derived from ‘strategic metals’. The word “strategic” works in two ways. It refers to metals where there is a medium term investment rationale to underpin their production, in other words where increased demand is predicted to meet constrained supply; and at the same time it refers to metals which can be regarded as strategic in a geo-political sense, those which will be important to support the major industrial trends that are unfolding and which the major economic powers will want to have an interest in. These include, but are not limited to gold, silver, copper, lithium, nickel, cobalt, manganese, platinum group and rare earth metals.
The new fund will be managed by Georges Lequime and Mark Smith of UK-based London Investment Consultants. Boasting decades of experience investing in mining companies and many years of operational experience in mining and geology, the pair combine strong technical and industry knowledge with proven financial modelling and portfolio management skills. Lequime, a mining engineer with 26 years’ experience in fund management and investment banking, spent four years in gold mining in South Africa. Smith meanwhile has 18 years’ experience in investment banking and company valuations and spent five years in West and East Africa in gold exploration – and it is the global network of CEOs and CFOs, brokers, commodity traders, mining engineers and geologists they have built which is responsible for so many of the opportunities they unearth.
The duo is best known for its management of Earth Gold Fund UI Eur, a pure precious metals fund offering exposure to precious metals stocks and the underlying metals. Having consistently outperformed its peers over the longer term, the SICAV is marketed predominantly within Germany, Austria and Switzerland and is a very different proposition to the broader, UK domiciled TB Amati Strategic Metals Fund.’ It is a fund the award-winning Lequime has managed since inception in 2008, and which the pair will continue to manage for the Zug-based Earth Resource Investment Group going forward.
The extraordinary level of quantitative easing seen in recent times has given investors good reason to hold gold, but policy will change in the near term – so, whilst the managers remain positive on precious metals, the demand for specialist metals will continue to grow as we transition to a lower carbon world and move away from fossil fuels. Energy distribution power grid infrastructure is dependent on copper, just as energy storage for industrial use and battery technology is on lithium and electrification is on both nickel and copper – and Amati sees some exciting investment opportunities in these areas.
Each metal has its own cycle, with cobalt and nickel in high demand right now. The managers will be looking to provide actively managed exposure ‘through the cycle’ and will look to determine the optimum combination of precious, speciality and base metals at any given time, in keeping with the transition to clean energy, electric vehicles and other long-term structural growth themes – taking account of the over-arching macro-economic and political risks and commodity price movements, as well as the specific circumstances of individual companies. At launch asset allocation is expected to be: Gold 50%; Silver 20%; Industrial Metals 10%; Speciality Metals 15%; Exploration Basket 5%. The managers anticipate the following geographical split: Africa 35%; South America 25%; North America 20%; Australia 10%; ROW 10%.
With the TB Amati UK Smaller Companies Fund and Amati AIM VCT plc both attracting strong inflows over the course of the last year, the investment team have been considering how we might evolve the Amati product suite. Investing in metals through the Fund for many years, Amati Founder and CEO, Dr Paul Jourdan has seen the potential demand for certain industrial metals increase exponentially, as has also followed the sharp increase in money supply in developed economies during 2020. It was when he looked to identify a metals fund investing in strategic metals – those required to enable the energy transition – as well as precious metals, that the penny dropped, and the launch conundrum was solved. No such fund was available in the UK market.
“Small and mid-sized mining companies present many of the most attractive investment opportunities in metals”, says Jourdan. “They can meaningfully grow the value of their businesses by virtue of exploration success and the de-risking of project build, whereas the large mature companies are almost entirely reliant on higher commodity prices to enhance the value of their businesses. They are however difficult to identify. That requires specialist expertise and real knowledge of the mining sector, and it is for that reason we have elected to work with Georges and Mark. They bring a rare level of expertise in global mining practice to bear on their investment decisions and are uniquely qualified to realise the potential of the many opportunities presented by the transition to clean, sustainable energy sources and a lower carbon world.
There was an obvious meeting of minds from the outset, a shared view that any new fund should invest in a broad range of metals. It means we can adapt the investment strategy and alter our asset allocation in line with evolving trends. That is consistent with our desire to construct class-leading investment products which remain fit for purpose and that investors can hold over the longer term.
“I am cognisant of the fact that many investors see mining as a ‘dirty’ business, but we are seeing big changes in terms of emissions and employment practices, with many companies making a positive impact on local communities through their environmental and education programmes, and a new emphasis appearing on lowering the carbon footprint of metal production. The TB Amati Strategic Metals Fund will adopt a ‘Clean Trade’ approach [Jourdan is a Trustee of the Clean Trade charity], so if a country lacks so many of the basic freedoms that we can’t see the beneficial impact of a mine on the wider community offsetting the potential harm caused by the implicit funding of an oppressive government via taxes, we won’t invest.” This is an approach that we are hoping will be adopted by investors on a wider scale.”
|Fund structure:||sub-fund of TB Amati Investment Fundsm an OEIC|
|Holdings:||35-45, with a market capitalisation of US$100m–US$10,000m|
|Maximum position:||8% of the value of the portfolio, but initially 1-2%|
|Launch date:||1st March, with price set on 15th|
|Benchmark:||EMIX Global Mining Index|
|Charges:||AMC (Annual Management Charge) 0.75% / OCF (Ongoing Charges Figure) capped at 1.0%|