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Invest in resources sector equities not physical commodities, urges Barings

Wednesday 6th August 2014

Resources sector equities are currently more attractive than direct investments in physical commodities, according to Baring Asset Management (Barings). 
The firm has urged investors to focus on investing in ‘companies not commodities’ in order to benefit from strong opportunities and increasing global demand for resources.
The positive outlook for resource equities is based on the size of differential between what Barings sees as positive company specific drivers versus a negative – often macro driven – consensus view.  
Barings has been investing in resource-related equities for nearly 20 years and manages more than $900 million in a range of different strategies in the asset class.  
Duncan Goodwin, Head of Global Resources at Barings, said: “After several years of a benign-to-negative commodity pricing backdrop and associated de-rating by shareholders, companies are finally taking action to improve margins and returns driven by self-help and or restructuring.”  
“To capture this market shift, we are putting more emphasis on the bottom-up element of stock selection and increasing the level of stock conviction in the Baring Global Resources Fund.  That means a reduced emphasis on top-down portfolio construction with more risk taken at the stock level and reduced macro factor risk.”  
“We are increasing the level of stock conviction by decreasing the number of investments held in our portfolio. With the right analysis, we believe it is possible to target investment opportunities offering superior returns and better prospects for positive earnings surprises,” he added.

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