Mine the Sector's Strengths


"There is an emerging third strategy for buying into a resources fund."

So many resource companies. . .and there are plenty more to come: there were 13 resource initial public offerings listed on the ASX website at time of writing, and they'll be followed by others that believe they have a great story and need to raise a quick $5 million or $10m.

And so many places. Take Australia out of the mix and you still have a smorgasbord of companies on the ASX and commodities scattered across the globe.

But there is one advantage for those choosing plays abroad over those plumping for the safety of Australia: you can get access to many more majors.

Many investors take the strategy of owning [majors]. . .or follow the juniors and hope to win the lottery.

Gradually, there is the emerging and third (and quite complementary) strategy of buying into a resources fund. There is the listed Global Mining Investments or unlisted funds, such as Perpetual's newly launched Global Resources Fund, and the older Colonial First Global Resources Fund.

Funds, they need deep pockets to do the necessary research. Global Mining Investments pays London-based BlackRock to do all the thinking. It has one of the biggest teams in the world following the resources sector.

GMI suffered in the aftermath of the global financial crisis, but. . .during the past five years, the portfolio added an average 19% in value each year. . .or 8.2%/year average for the ASX resources index.

And a fund its size can do things few individuals can manage, such as hold a large convertible note in Swiss giant Glencore [or]. . .take big positions in sectors BlackRock thinks are likely to move. Recently, GMI has been going overweight in platinum because the supply side could get tight and there are few large producers.

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