Australian fiduciary investors are well-acquainted with the resources sector. They have to be. But Duncan Goodwin, a resources specialist based in Edinburgh, believes he can make it a bit more interesting for them. Goodwin is the director of global resources for Martin Currie Investment Management, which has managed a global resources long/short fund since 2003 and a long-only version since 2006. He is a strong believer in looking at the sector from a global rather than regional perspective. “We believe that margins play out globally,” he said. “We think it’s the right thing to be diversified through the various sub-sectors we look at.
We also look at industries such as chemicals and paper.” The Martin Currie definition includes shipping, engineering and construction companies, which are related to the resources sector. Goodwin also believes that when a manager is searching the whole world for resources opportunities it will tend to pick up on trends much earlier than when it is just looking at one country or region. “There are also anomalies which can be exploited,” Goodwin said. “We can see when companies are mis-valued… We disaggregate the big companies’ exposures to various sectors for better value. “What the investor is getting is no limits to a particular market, you’re getting exposure to the best companies globally. It gives you a much better risk/return position.”
On the risk/return front, the strategy provides downside protection, Goodwin said. “For example, what happens if the gas or iron ore sector turns down? We can invest in those companies which will actually benefit from the changes,” he says. The firm does not build its portfolios around a series of macro views. It looks for inefficiencies and trends to build exposures from the bottom-up. As Martin Currie defines it, resources account for about 25 per cent of the MSCI All Countries World Index (ACWI). So, if you buy the argument, where does an Australian super fund put this in the portfolio? Kimon Kouryialas, country head Australia of Martin Currie, said it can come out of global equities or the alternatives allocation. Goodwin said there are three important considerations: global arbitrage opportunities; anomalies in joint ventures that resources companies do because of the size of the expenditure requirements; and, the inter-connected nature of the sub-sectors.