Download - Investec asset management
Is the commodity supercycle still alive?
George Cheveley - Portfolio Manager, Commodities & Resources
Citywire Wealth Manager Retreat, 17 - 19 October 2012
Page 2 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Target audience
This document is only for professional investors, professional financial advisors and, at
their exclusive discretion, their clients. No other person should rely on the information
contained in this document.
If you plan to show this to your clients, please ensure that you comply with any applicable
local marketing regulations.
This document is not to be generally distributed to the public.
Page 3 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Global specialist asset manager
As at 31 August 2012
*Permanent employees
Investec Asset Management
● Founded in 1991 by current leadership
● Independently managed entity within
Investec Group
● Origins are African – presence and
perspective is global
● Investment and Operational hubs in
London & Cape Town
● Client group teams in Africa, Americas, Asia,
Australia, Europe, Japan, Middle East
and the UK
● Over 700 employees*
● Over £60 billion in assets under management
Investec Asset Management Offices
Short Pack
Page 4 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Commodities & Resources Capability
● Team: Experienced investment team with fund management,
industry and operational, investment banking and
commodity research backgrounds
● Philosophy: Systematic investment process including two-
pronged approach to commodities and resource equities
● Investment process: Fundamental commodity market
analysis and resources equity research
● Comprehensive: Cover all commodities including energy,
precious metals, base and bulk metals and mining,
agriculture, softs and other commodities
● Innovative and flexible: Hold resource equities, commodity
ETCs and derivatives
● Capability AuM: $5.0 billion invested in commodities and
resource equities (as of 31 August 2012)
● Wide range of commodity and resource equity solutions,
both generalist and specialist
Page 5 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Global Commodities and Resources Core team
GSF ENR
GSF GDR
OEIC ENR
GSY B GCR
GSF All Comms & Resources
Insti Comms & Resources
Updated
End Jun 2012
Dawid Heyl Agriculture
Scott Winship Precious metals
Simon Gardner-Bond Base, bulk & precious metals
Tom Solomon
Investment support analyst
Graeme Baker
Energy
Strategy Leaders
Bradley George Portfolio manager & team leader
George Cheveley Portfolio manager
Investment Specialists
Team of 2 dedicated traders
Daniel Sacks SA resources & gold
An experienced team with diverse backgrounds
Charles Whall* Energy
Tom Nelson* Energy
*New Joiner from 17 September 2012
Source: Investec Asset Management
● Heritage of investing in
commodities and resources
● Diverse mix of industry,
investment banking,
commodity and resource
equity research and portfolio
management
● Mix of skill sets resulting in
what we consider to be high
quality idea generation
● Average of 12 years
experience
● Leverages off the resources of
the SA Equity investment
team
Page 6 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Where are we in the commodity cycle? September 2012 levels similar to late 2006
0
50
100
150
200
250
300
350
400
450
Dec -1998
Dec -1999
Dec -2000
Dec -2001
Dec -2002
Dec -2003
Dec -2004
Dec -2005
Dec -2006
Dec -2007
Dec -2008
Dec -2009
Dec -2010
Dec -2011
MSCI AC World Energy Index MSCI AC World Materials Index DJUBS TR Index
Source: Bloomberg, 27 September 2012
Page 7 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Global commodities and resources Divergent commodity returns YTD 2012
● Commodities have had a mixed 2012
● Global growth concerns due to
uncertainty in the euro zone is the
main cause
● We still believe long term in the
structural commodity story
● Soft periods like the current one are
inevitable
Source: Bloomberg as at 9 October 2012. DJ UBS Sub-indices Excess Return except for those marked spot
Page 8 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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0
200
400
600
800
1,000
1,200
Aug-0
9
Oct-09
Dec-
09
Feb
-10
Apr-
10
Jun-1
0
Aug-1
0
Oct-10
Dec-
10
Feb
-11
Apr-
11
Jun-1
1
Aug-1
1
Oct-11
Dec-
11
Feb
-12
Apr-
12
Jun-1
2
Aug-1
2
Oct-12
US
$/t
EU HR Coil EU Rebar
Turkey Rebar
0
200
400
600
800
1,000
1,200
Oct-09
Dec-
09
Feb
-10
Apr-
10
Jun-1
0
Aug-1
0
Oct-10
Dec-
10
Feb
-11
Apr-
11
Jun-1
1
Aug-1
1
Oct-11
Dec-
11
Feb
-12
Apr-
12
Jun-1
2
Aug-1
2
Oct-12
US
$/t
China Rebar
China HRC
US HRC
US Rebar
US No.1 HMS Scrap
0
20
40
60
80
100
120
140
160
Oct-09
Dec-
09
Feb
-10
Apr-
10
Jun-1
0
Aug-1
0
Oct-10
Dec-
10
Feb
-11
Apr-
11
Jun-1
1
Aug-1
1
Oct-11
Dec-
11
Feb
-12
Apr-
12
Jun-1
2
Aug-1
2
Oct-12
US
$/t
0
40
80
120
160
200
Oct-09
Dec-
09
Feb
-10
Apr-
10
Jun-1
0
Aug-1
0
Oct-10
Dec-
10
Feb
-11
Apr-
11
Jun-1
1
Aug-1
1
Oct-11
Dec-
11
Feb
-12
Apr-
12
Jun-1
2
Aug-1
2
Oct-12
US
$/t
Iron ore bounces as Chinese steel recovers
Europe Steel
Thermal Coal Iron Ore
US and Asia Steel
Source: Bloomberg, MB, SBB
Page 9 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Chinese infrastructure and construction indicators showing some
improvement
Source: Macquarie June 2012
Chinese infrastructure investment needs to catch up Positive signals from the Chinese construction sector
Page 10 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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..but overall growth has continued to slow as manufacturing
softens
Source: Macquarie June 2012
Chinese industrial growth continued to slow End use data are mixed
Page 11 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Over 150 million tonnes of iron ore production has costs above
$100/t CIF China
Source: Macquarie, 2012
Supply curve to Chinese market for iron ore fines
Page 12 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Long iron ore equities and short US steel equities
Source: Bloomberg, IAM October 11th 2012
Iron Ore equities have underperformed ..but steel equity shorts have provided some protection
Page 13 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Platinum Supply & Demand Model
000oz 2010 2011 2012F 2013FCAGR
('00-'11)
CAGR
('11-'13)
SupplySouth Africa 4,635 4,855 4,317 4,467 2% -4%
Russia 825 835 777 797 -2% -2%
North America 210 350 350 350 2% 0%
Zimbabw e 280 340 338 379 14% 6%
Others 110 100 100 100 0% 0%
Total Producer Supply 6,060 6,480 5,882 6,093 2% -3%
DemandAutocatalyst 3,075 3,105 3,107 3,205 5% 2%
Chemical 445 470 492 511 4% 4%
Electrical 220 230 246 264 -6% 7%
Glass 385 555 562 579 7% 2%
Investment 655 460 0 0
Jew ellery 2,420 2,480 2,589 2,702 -1% 4%
Medical & Biomedical 230 230 232 233 -1% 1%
Petroleum 170 210 218 227 6% 4%
Other 300 355 367 380 0% 3%
Total Gross Demand 7,900 8,095 7,813 8,101 3% 0%
Recycling 1832 2045 1962 1958 8% -2%
Autocatalyst 1085 1225 1173 1189 8% -2%
Electrical 12 10 12 13 15%
Jew ellery 735 810 777 757 8% -3%
Total Net Demand 6,068 6,050 5,851 6,142 0% 1%
Surplus / (Deficit) -8 430 31 -49
Average Annual Price 1,613 1,758 1,538 1,650
Platinum market moves back into deficit as supplies are cut
Platinum supply losses in South Africa
Company Mine Yr Pt Removed Ounces Cut
Impala Strike (Feb/Mar) Impala Lease 2012 150,000
Eastern Platinum Mareesburg 2012 20,000
Aquarius/Anglo Platinum Marikana 2012 60,000
Aquarius Everest 2012 50,000
Lonmin Marikana 2012 85,000
Anglo Platinum Rustenburg 2012 67,000
Total 432,000
Lonmin Marikana 2013 50,000
Eastern Platinum Mareesburg 2013 50,000
Total 100,000
Page 14 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Platinum 51% of production is loss making at current prices
Costs to remain high due to:
● Strong rand
● Uncertain electricity and water supply outlook,
● Organised labour demanding real pay increases
Platinum Industry Cost Curve including capex
Source: Renaissance Capital, April 2012
0
500
1,000
1,500
2,000
2,500
3,000
3,500
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icke
nham
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MS
)
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t Mile
(A
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Mim
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Mim
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(AQ
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RB
Pla
ts (
RB
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PP
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t (A
MS
)
WLT
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S)
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o R
iver
s (A
RI)
*
Impl
ats
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up (
IMP
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Mot
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Page 15 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Platinum Palladium
Long platinum/palladium and short the equity
Lonmin has fallen as labour situation worsened
Bloomberg, 12 October 2012
Page 16 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Crude oil supply The futures curve is suggesting something different from fundamentals longer term
Source: Bloomberg, 24 September 2012
Brent crude oil price Brent crude oil futures curve
0
20
40
60
80
100
120
140
160
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
$/b
bl
90
95
100
105
110
115
Nov-1
2
Ma
r-1
3
Jul-1
3
Nov-1
3
Ma
r-1
4
Jul-1
4
Nov-1
4
Ma
r-1
5
Jul-1
5
Nov-1
5
Ma
r-1
6
Jul-1
6
Nov-1
6
Ma
r-1
7
Jul-1
7
Nov-1
7
Ma
r-1
8
Jul-1
8
Nov-1
8
Ma
r-1
9
Jul-1
9
Nov-1
9
Ma
r-2
0
Jul-2
0
Nov-2
0
$/b
bl
Page 17 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Crude oil Demand – increasingly a Non-OECD story
Source: 1. Bloomberg, 2. IEA and Bernstein research, 3. BP, 4. Simmons and Co. – September 2012
1. Global demand remains robust
4. Per capita oil consumption (barrels per year)
2. Non-OECD set to overtake OECD
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
22.5
25.0
27.5
30.0
32.5
Oil
Co
nsu
mp
tio
per
Cap
ita
(Bar
rels
P
er Y
ear)
Japan USA South Korea China India
3. Strong growth from emerging markets
20
25
30
35
40
45
50
55
60
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
E
20
13
E
20
14
E
20
15
E
20
16
E
20
17
E
20
18
E
20
19
E
20
20
E
mn
bb
ls p
er
da
y
OECD demand Non-OECD demand
70
75
80
85
90
95
Aug 2
002
Jan 2
003
Jun 2
003
Nov
2003
Apr
200
4
Sep 2
004
Feb
2005
Jul 200
5
Dec
2005
May
2006
Oct 200
6
Apr
200
7
Sep 2
007
Feb
2008
Jul 200
8
Dec
2008
May
2009
Oct 200
9
Mar 2010
Aug 2
010
Jan 2
011
Jun 2
011
Dec
2011
May
2012
Glo
ba
l o
il d
em
an
d (m
n b
bl/
da
y) 1.8%
CAGR
Page 18 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
000 b
bls
pe
r d
ay
Incremental demand Incremental decline
Crude oil Supply – Decline rates of existing oil fields and capex increasing on new fields
1. Increasing decline rates
● The IEA consensus estimates that global oil
production will decline at 2-5% per annum over the
next decade
● IAM forecast declines of over 5%
● What consensus appears to be missing…
− Majority of new fields are deep-water
− Increasing unconventional production
− Smaller field sizes
● All these have higher decline rates
− Over 83% of the world’s major oil fields are past
peak production
Source: 1, 2 IEA and IAM, 3. Barclays E&P survey 2012 – September 2012
2. The decline in major oil fields is serious
3. Rising capital expenditure requirements
GRAPH 3 – Have put a
white box over (in mn) We
need to change underlying
data but something is weird
with the link!!!!! Need to put
in energy files.
$0
$20
$40
$60
$80
$100
$120
$0
$200
$400
$600
$800
1985 1989 1992 1995 1998 2001 2004 2007 2010
$ p
er
bbl
E&
P S
pendin
g $
bn
Global E&P spending (in mn)
Inflation Adjusted WTI prices
Page 19 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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250,000
270,000
290,000
310,000
330,000
350,000
370,000
390,000
410,000
07
-Jan
21
-Jan
04
-Fe
b
18
-Fe
b
03
-Ma
r
17
-Ma
r
31
-Ma
r
14
-Ap
r
28
-Ap
r
12
-Ma
y
26
-Ma
y
09
-Jun
23
-Jun
07
-Jul
21
-Jul
04
-Au
g
18
-Au
g
01
-Se
p
15
-Se
p
29
-Se
p
13
-Oct
27
-Oct
10
-Nov
24
-Nov
08
-Dec
22
-Dec
000' bbls
DOE US invetories 2012 2011 2010 2009 2008 2007
2,500
2,550
2,600
2,650
2,700
2,750
2,800
2,850
Dec
Jan
Fe
b
Ma
r
Apr
Ma
y
Jun
Jul
Aug
Sep
Oct
Nov
Dec
mn b
bls
2012 2011 2010 2009
2008 2007 5 year average
Crude oil OECD stocks below five-year average and marginal costs rising
Source: 1. Bloomberg/IEA, 2. Bloomberg, 3. Goldman Sachs – September 2012
1. OECD oil inventories 2. US oil inventories
3. Rising marginal cost Strategic Petroleum Reserves (SPR)
● Statements from the IEA and US government
regarding potential SPR release to alleviate
consumer pressures
● Last SPR release in May 2011 was 30mn bbls
● Potential release driven by higher oil and gasoline
prices and desire to assist QE3 monetary policy with
stimulative measures
33240
33358
33476
33592
33714
33830
33949
34072
34190
34309
34429
34548
34667
34786
34905
35023
35143
35262
35377
35500
35619
35879
35998
36115
36236
36355
36472
36592
36710
36826
36949
37067
37186
37307
37425
37543
37663
37782
37900
38020
38139
38258
38377
38495
38614
38734
38852
38971
39087
39204
39323
39428
39537
39646
39756
39864
39973
40091
40211
40330
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E
US
$/b
l
Brent oil price required for marginal cost player to return cost of capital
Brent oil price required for average cost player to return cost of capital
5yr forward Brent oil price
Page 20 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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R² = 91%
100
200
300
400
500
600
700
0 200 400 600 800 1,000 1,200
Glo
bal
inte
gra
teds s
hare
price i
ndex
Global integrateds commodity indicator
Global integrateds 1998-2012
2011 and 2012
Current
Linear (Global integrateds 1998-2012)
Divergence between commodity prices and energy equities
● Short term disconnect between commodity and equity has moved out to levels seen
back at the end of September last year
● Since the beginning of 1998, there is a 91% correlation between the share price
performance and the overall energy commodity indicator (blue dots on chart below)
● 2011/12 data (navy blue dots below) highlight the significant divergence that occurred
Source: Investec Asset Management September 2012
current divergence
Page 21 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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0
20
40
60
80
100
120
140
160
180
Jan 2
007
May 2
007
Sep
2007
Jan 2
008
May 2
008
Aug
2008
Dec 2
008
Ap
r 2009
Aug
2009
Dec 2
009
Ap
r 2010
Aug
2010
Dec 2
010
Ap
r 2011
Aug
2011
Dec 2
011
Ap
r 2012
Aug
2012
Ind
exed
perf
orm
ance
XOM US equity CVX US equity TOT US equity E US equity RDS/A US equity
European integrated companies have decoupled from US peers We have seen negative sentiment towards European companies such as Total
● Royal Dutch Shell – 5.1% dividend yield backed up with 7.3% free-cash generation. Currently
trading on 5.0x 2013 EV/DACF and 7.2x 2013 Price/Earnings*
● Total – 7.4% dividend yield backed up with 7.8% free-cash generation. Currently trading on 4.6x
2013 EV/DACF and 6.5x 2013 Price/Earnings*
* Assuming $110/bl Brent oil and $5.00/mmcf US natural gas long term
Source: Bloomberg, 31 August 2012
Page 22 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Energy sector outlook summary Oil outlook
Oil
Nea
r te
rm
• Non-OECD demand growth has remained strong through economic weakness
• OECD demand predominantly transportation, demand elasticity low
• Oil supply is tight but manageable
• QE3, stimulative environment supportive
• Geopolitical tensions high, SPR release potential
• OPEC production near all time highs; Saudi pumping hard to dampen price
• Non OPEC production, especially Russia at over 10mn bbls/day running hard
• OECD inventory levels below five-year average
• Large NYMEX open position suggests strong demand from speculative buying which exaggerates volatility
Forecast: $110/bl Brent for 2012, $110/bl Brent for 2013
Lo
ng te
rm
• New field start ups are disappointing (e.g. Thunder Horse and Jubilee)
• Non-OPEC production continues to frustrate outside North America
• Long term non-OECD demand growth will tighten markets further (IAM assume 3.9% p.a.)
• OPEC spare capacity should continue to fall as Saudi Arabia struggles to bring on more
• Industry cost inflation continues to increase, approximately 7-10%
• Oil price required to deliver marginal new fields is above $100/bl and require a return on capital
Forecast: $115/bl Brent increasing in real terms
Page 23 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Summary views
At a glance – Commodity and Resource equity views over next 3-6 months
UPDATE
When needed
This is taken from
GSF GDR
presentation
Data provided by
from Commodities
team EMMA
Margetts
Slide is in:
ENR GSF
GNR GSF
GsyB GCR
Neutral Strongly up Sharply down Trending up Trending down
Views expressed for a resource equity sector are subjective and are for the sector as a whole. Investec will have different views
for different stocks within that sector. As at 10 October 2012
The shorter-term case
for commodities
Commodity Equity Commodity Equity Commodity Equity Commodity Equity
Energy Precious
Metals
Base and
Bulk Metals
Ags and
Softs
Crude Oil Gold Copper Corn
Natural Gas Silver Aluminium Soybean
Refiners n/a Platinum Zinc Wheat
Oil services n/a Palladium Nickel Sugar
Alternative
Energy n/a Diamonds Iron Ore Potash
Thermal Coal Coking Coal Phosphate
Uranium Steel Urea
OEIC Investec Enhanced Natural Resources Fund Bradley George and George Cheveley
Portfolio Managers
October 2012
Page 25 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Diversif ied Energy eq, 20.6%Oil Services eq, 9.0%
Gold eq, 8.8%
Iron Ore eq, 8.1%
Diversif ied Metals eq, 6.2%
Seeds and crop protection eq, 5.8%
Oil & Gas E&P eq, 5.6%
Natural gas E&P eq, 5.6%
Phosphate eq, 4.2%
Sugar eq, 4.0%
PGMs eq, 3.4%
Copper eq, 3.2%Steel eq, 3.1%
Diversif ied Resources Eq, 2.3%
Oil E&P eq, 2.1%
Ag Equipment eq, 1.8%
Mineral Sands Eq, 1.2%
Zinc eq, 1.1%
Palm Oil eq, 1.0%
Silver eq, 0.9%Thermal Coal eq, 0.9%
Met Coal eq, 0.3%
Water eq, 0.3%
Palladium, 4.2%
Platinum, 3.0%
Soybeans, 2.4%
Gold, 2.3%
Crude oil, 1.8%
Tin, 1.3%
Commodities, 15.0%
Portfolio diversification Equity and Commodity exposure as at 30 September 2012
Source: Investec Asset Management
*Includes long and short positions
The portfolio may change significantly over a short period of time. This is not a buy or sell recommendation for any particular security 1 Volatility: Lipper 1 year standard deviation 2 VaR: Monthly VaR at 99th percentile based on an internal implementation of a third party model. The portfolio may change
significantly over a short period of time.
Commodities and resource gross exposure*
UPDATE
MONTHLY
Data provided by
Dawid Heyl
G:\Depts\Marketing\Presentations\Hamilton Brown Graphics\¬MASTER
OEIC\MASTER ENR (Bradley George)\¬Evidence\ENR
master.xlsx\Commod and Geo chart
G:\Depts\Marketing\Presentations\Hamilton Brown Graphics\¬MASTER
OEIC\MASTER ENR (Bradley George)\¬Evidence\ENR
master.xlsx\ENR_Exposure Table
As at
30 September 2012
Equity
Exposure
Commodity
Exposure
Gross 99.8% 15.0%
Long 77.8% 13.2%
Short 22.0% 1.8%
Net 55.8% 11.4%
Volatility 1)
VaR 2)
15.6%
-6.92% For VAR go here:
G:\Depts\Risk\reports\teams\Commodities\
EMAVARU1ENRES file
VaRReport tab.
Pick the 99% Monthly VaR figure. Use Portfolio
Change Percent value
Page 26 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Country stock exchange exposure
Portfolio diversification Country stock exchange exposure and top holdings as at 30 September 2012
Source: Investec Asset Management
The portfolio may change significantly over a short period of time
This is not a buy or sell recommendation for any particular security
UPDATE
MONTHLY
Data provided by
Dawid Heyl
G:\Depts\Marketing\Presentations\Hamilton Brown Graphics\¬MASTER
OEIC\MASTER ENR (Bradley George)\¬Evidence\ENR
master.xlsx\Commod and Geo chart
Remember
to sort table
by weight %
Filter gross
exp %.
Column -
Top 10
US, 41.2%
UK, 33.8%
Canada, 14.1%
Australia, 5.3%
Italy, 4.3%
Switzerland, 4.0%
France, 3.0%
Europe, 2.3%
Poland, 2.2%
Russia, 2.1%
Belgium, 1.1%
China, 0.7%
Norway, 0.6%
Top 10 holdings Exposure %
Syngenta (short) Agriculture and Softs -4.0%
Goldcorp Precious metals 3.6%
AK Steel (short) Base and bulks -3.1%
Platinum ETC Precious metals 3.0%
Total SA Energy 3.0%
Purecircle Agriculture and Softs 2.7%
Suncor Energy Energy 2.7%
Palladium ETC Precious metals 2.6%
Rio Tinto Base and bulks 2.6%
Anglo American (short) Base and bulks -2.6%
Page 27 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Gross and Net exposure since inception
Source: Investec Asset Management, 30 September 2012
UPDATE
MONTHLY
Chart is provided
by Dawid Heyl
G:\Depts\COMMODI
TY\Global Enhanced
Natural Resources
Fund\DDQ\OEIC\EN
R attribution,
exposure, pricing 29
July 11.xlsx\monthly
exposure tab
Paste as a link from
source in case
underlying data is
requested
-100%
-50%
0%
50%
100%
150%
May-0
8Jun-0
8Jul-08
Aug
-08
Sep
-08
Oct-
08
No
v-0
8D
ec-0
8Jan-0
9F
eb
-09
Mar-
09
Ap
r-09
May-0
9Jun-0
9Jul-09
Aug
-09
Sep
-09
Oct-
09
No
v-0
9D
ec-0
9Jan-1
0F
eb
-10
Mar-
10
Ap
r-10
May-1
0Jun-1
0Jul-10
Aug
-10
Sep
-10
Oct-
10
No
v-1
0D
ec-1
0Jan-1
1F
eb
-11
Mar-
11
Ap
r-11
May-1
1Jun-1
1Jul-11
Aug
-11
Sep
-11
Oct-
11
No
v-1
1D
ec-1
1Jan-1
2F
eb
-12
Mar-
12
Ap
r-12
May-1
2Jun-1
2Jul-12
Aug
-12
Sep
-12
Total longs Total shorts Total Net Total Gross
Page 28 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Investec Enhanced Natural Resources Fund ‘A’ (Retail) Share Class Performance (GBP net of fees since launch 1 May 2008)
UPDATE
MONTHLY
Chart is provided
by Dawid Heyl
G:\Depts\Marketing\Presenta
tions\Hamilton Brown
Graphics\¬MASTER
OEIC\MASTER ENR
(Bradley
George)\Evidence\ENR
master.xlsx
TAB: ENR monthly
perf_£
Past performance figures are not audited and should not be taken as a guide to the future
Source: Lipper to 30 September 2012, NAV based, income reinvested (inclusive of management fees but excluding any initial charge)
net of UK basic rate tax, in GBP.
‘A’ Share Class Performance since ENR Fund launched 1 May 2008
Comparative index: 50% MSCI ACW Energy NR, 50% ACW Materials NR
Description Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
YTD
Cumulative
ENR OEIC Fund 2012 7.0% 1.8% -6.5% -1.6% -4.1% 0.3% 3.2% -1.6% 0.8% -1.3%
Comparative index 2012 6.5% 3.2% -4.6% -3.0% -7.9% 2.7% 1.5% 0.6% 3.1% 1.1%
ENR OEIC Fund 2011 -2.4% 1.1% 1.1% -0.7% -0.8% -0.2% 1.2% -4.8% -11.8% 8.3% -5.3% -0.5% -15.0%
Comparative index 2011 -0.9% 3.3% 2.9% -0.9% -3.2% 0.6% -2.7% -8.4% -11.7% 11.8% 0.0% -1.6% -11.9%
ENR OEIC Fund 2010 -1.8% 5.0% 1.9% 0.1% 0.9% -2.7% -0.3% 0.6% 2.4% 1.6% 3.2% 7.8% 21.0%
Comparative index 2010 -6.2% 6.8% 7.5% -0.6% -6.5% -7.7% 4.3% -1.4% 8.1% 3.3% 2.7% 10.0% 20.2%
ENR OEIC Fund 2009 8.1% 0.0% 7.5% 8.1% 5.6% -5.2% 2.3% 2.9% 3.7% -0.2% 3.4% 2.4% 45.3%
Comparative index 2009 -5.6% -6.1% 8.9% 7.6% 7.0% -7.0% 7.7% 3.3% 8.3% -2.5% 6.8% 3.7% 34.4%
ENR OEIC Fund 2008 3.0% -1.4% -12.1% -1.6% -9.8% -9.2% 1.9% 5.1% -22.9%
Comparative index 2008 6.5% -2.8% -11.0% 2.7% -18.3% -16.0% 0.2% 8.9% -29.1%
Page 29 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
87.786.7
91.3
102.4
113.8
20%
40%
60%
80%
100%
120%
140%
160%
May 0
8Jun 0
8Jul 0
8A
ug
08
Sep
08
Oct 08
No
v 0
8D
ec 0
8Jan 0
9F
eb
09
Mar
09
Ap
r 09
May 0
9Jun 0
9Jul 0
9A
ug
09
Sep
09
Oct 09
No
v 0
9D
ec 0
9Jan 1
0M
ar
10
Ap
r 10
May 1
0Jun 1
0Jul 1
0A
ug
10
Sep
10
Oct 10
No
v 1
0D
ec 1
0Jan 1
1F
eb
11
Mar
11
Ap
r 11
May 1
1Jun 1
1Jul 1
1A
ug
11
Oct 11
No
v 1
1D
ec 1
1Jan 1
2F
eb
12
Mar
12
Ap
r 12
May 1
2Jun 1
2Jul 1
2A
ug
12
Sep
12
Ind
exed
perf
orm
ance
Investec Enhanced Natural Resources A Acc Net GBP (MF) First State Global Resources A GBP Acc (MF)
JPM Natural Resources A Acc (MF) 50% MSCI ACW Energy NR50% ACW Materials NR (MP)
BlackRock World Mining Trust PLC (EQ)
Relative performance against comparative index and peer
group
Past performance figures are not audited and should not be taken as a guide to the future
Source: Lipper, 30 September 2012
Performance for all funds and comparative index in GBP net of fees, since 1 May 2008 inception date for
Investec Enhanced Natural Resources Fund
Page 30 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
The points to remember!
● We believe the 15-20 year secular bull market in commodities is real
● The journey will not be smooth, so maintain your exposure and lower your volatility
● Ensure your manager makes use of the widest opportunity set
● Commodities / Resource equities do not all move in the same direction
● Know when to play the underlying commodity or the resource equity
● Make sure your manager has an absolute return mindset
● Short exposure can generate additional returns and dampen volatility
● Derivatives have a part to play to improve your risk / return ratios
Appendix
Page 32 | Citywire Wealth Manager Retreat | CONFIDENTIAL
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Investec Enhanced Natural Resources Fund Summary of Key Terms
Fund name: Investec Enhanced Natural Resources Fund
Investment advisor: Investec Asset Management Limited
Fund structure: UK domiciled, with extended UCITS investment
powers
Minimum investment: £1,000
Annual management fee: 1.50% p.a. (P shares)
Other charges: 0.09%
Performance fee: 20.00% p.a. of outperformance over hurdle rate
Hurdle rate: Sterling LIBOR +4.00%
URL: www.investecassetmanagement.com/enr
Fund ratings may be provided by independent rating agencies based on a range of investment criteria. For a full description of the
ratings please see www.investecassetmanagement.com/ratings
Page 33 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Investec Enhanced Natural Resources Fund Attribution 1 January 2012 to 30 September 2012
● The Fund delivered returns with a total attribution of 32bps* YTD September 2012
Sector contribution in bps Equity Long Equity Short Commodity Long Commodity Short Total
Precious Metals 18 28 16 - 62
Base and Bulk Metals -465 88 13 23 -341
Energy 76 39 - 75 188
Agriculture and Softs 338 -40 -26 2 273
Diversified Resources/EPM -22 -49 - - -71
Total -55 66 2 100 111
Past performance figures are not audited and should not be taken as a guide to the future. * Cash positions contributed -80bps of return over this period
The total relative performance does not exactly equate to the sum of the attribution due to compounding differences at security,
position, asset class and sector level
Source: Investec Asset Management, This is not recommendation to buy, sell or hold a particular security
Performance from 1 January 2011 to 30 September 2012, in GBP gross of fees.
Stock contribution (top 10) Commodity bps
Ak Steel (Short) Steel 167
Purecircle Sugar 126
Anglo American (Short) Diversified Miner 86
WTI Crude Oil ETC (Short) Oil 75
Nexen Oil 64
Lonmin (Short) PGMs 62
Phosagro Phosphate 58
Lundin Mining Copper 58
Potash Corp. Of Saskatchewan Potash 49
Agco Ag. Equipment 48
Stock contribution (bottom 10) Commodity bps
SXPP Put Option Diversified Mining -115
London Mining Iron Ore -88
Northland Resources Iron Ore -79
Ultra Petroleum Natural Gas -63
Iluka Resources Minerals Sands -61
Fortescue Metals Group Iron Ore -54
Whitehaven Coal Coal -52
S&P 500 Put Option Diversified Resources -49
Syngenta Crop protection -40
United States Steel Steel -38
UPDATE
Quarterly
Data is provided
by Performance
team (Tom)
Page 34 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Investec Enhanced Natural Resources Fund Attribution 4 January 2011 to 31 December 2011
● The Fund delivered returns with a total attribution of -1452bps* 2011
Sector contribution in bps Equity Long Equity Short Commodity Long Commodity Short Total
Precious Metals -531 21 -104 -7 -620
Base and Bulk Metals -662 150 0 93 -418
Energy -100 6 0 -15 -109
Agriculture and Softs -276 -2 -27 17 -289
Diversified Resources/EPM -32 43 0 0 11
Total 0 0 0 0 -1425
Past performance figures are not audited and should not be taken as a guide to the future.
* Cash positions contributed -27bps of return over this period
The total relative performance does not exactly equate to the sum of the attribution due to compounding differences at security,
position, asset class and sector level
Source: Investec Asset Management. This is not recommendation to buy, sell or hold a particular security.
Performance from 1 January 2011 to 31 December 2011, in GBP gross of fees
Stock contribution (top 10) Commodity bps
Iluka Resources Mineral sands 138
Petrohawk Energy Natural gas 106
Outokumpu Steel 85
Nickel Derivatives Nickel 85
Arcelormittal Steel 57
Boliden Zinc 46
Marathon Oil Oil and natural gas 46
Range Resources Natural gas 33
Petrofac Oilfield services 27
Murphy Oil Oil and natural gas 27
Stock contribution (bottom 10) Commodity bps
Teck Resources Diversified metals -119
Newcrest Mining Gold -112
Ultra Petroleum Natural gas -107
Lundin Mining Diversified metals -106
Ncondezi Coal Met. coal -104
Vedanta Resources Diversified metals -92
Aquarius Platinum Platinum -87
Rio Tinto Diversified metals -77
Fortescue Metals Iron ore -69
Palladium Derivatives Palladium -69
UPDATE
Monthly
Data is provided
by Performance
team (graeme
baker)
Page 35 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Risk management
Risk Management System
● EMA Risk System
− Portfolio risk reports run on a daily basis
− Portfolio volatility
− Risk decomposition report shows breakdown of risk in the active portfolio:
Country risk factors, sector risk factors, valuation risk factors, asset risk factors
− Value-at-Risk (VaR) Matrix at 99%, 95% and 90% confidence level, daily, weekly
and monthly
Page 36 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Risk management Current portfolio restrictions
● Cannot invest in companies with a market capitalisation of <$100 million
● Maximum of 10% of Net Asset Value may be invested in any one stock
● Maximum of 10% of Net Asset Value may be invested in the securities of any one issuer
● Maximum of 80% of Net Asset Value in Energy, 80% in Metals and Mining and 60% in Agriculture and Softs
● Maximum of 50% of Net Asset Value in securities listed in any one country
● Maximum of 20% in any one metal, energy or softs commodity security
● Derivative transactions used for efficient portfolio management and investment purposes (subject only to normal
gross and net exposure limits)
● Commodity ETC holdings (subject only to normal gross and net exposure limits)
● Maximum gross exposure allowed under UCITS 200%
● Minimum net exposure allowed under UCITS -50%
● Given max gross and minimum net exposure limits;
− maximum long and net exposure is 200% (scenario of 200% long and 0% short, which means 200% gross
and net)
− maximum short exposure is 125% (scenario of 75% long and 125% short, which means 200% gross and -
50% net)
These portfolio restrictions may change and not necessarily with notification to shareholders
Page 37 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Biographies
Bradley George
Head of Commodities &
Resources, Portfolio Manager
6 years with the firm
16 years of industry experience
Updated to
2012
Bradley is the Head of Commodities & Resources at
Investec Asset Management having been appointed to
this role in 2006.
He joined Investec Asset Management in London, after
spending seven years at Goldman Sachs where he
worked as an Executive Director in the Commodity
Division, involved in selling the GSCI (Goldman Sachs
Commodity Index) to investors and commodity
derivative hedging products to resource corporates.
Prior to this he worked in the Goldman Sachs
Investment Banking Division on Natural Resources
M&A transactions in both London and South Africa.
Previously he spent three years at KPMG in the
Financial Services Division, Treasury Advisory Group,
offering clients consultancy advice on financial
derivatives risk management.
Bradley graduated from the University of Cape Town
with an Honours degree in Business Science in 1994.
He completed his Post Graduate Diploma in Accounting
(PGDA) from the University of Cape Town in 1995. In
1998 he was awarded the Chartered Accountant
designation CA (SA).
George Cheveley
Portfolio Manager
5 years with the firm
21 years of industry experience
George is a Portfolio Manager and metals and mining
specialist in the Commodities & Resources team at
Investec Asset Management.
Prior to this he was Manager, Market Analysis - Base
Metals Marketing for BHP Billiton (the world’s largest
mining company) for three years, working in The Hague
and Singapore. At BHP Billiton, George conducted
extensive research into the base metals markets,
including a three month study, based in Shanghai, into
long term prospects for Chinese copper demand. He
was recruited to BHP Billiton in 2004 from CRU
(Commodities Research Unit), an independent
metals/chemicals related research company based in
London. At CRU, he had spent three years in the
Carbon Steel team and five years as Research
Manager – Copper, providing in-depth research and
forecasts to the industry, banks and hedge funds.
George began his career in 1990 in operations at British
Steel Strip Products, working for three years in the
Tinplate division.
George graduated from Oxford University in 1989 with
an Honours degree in Classics and in 1995 was
awarded an MBA from Warwick University.
Updated to
2012
Daniel Sacks
Portfolio Manager
15 years with the firm
15 years of industry experience
Daniel is a Portfolio Manager at Investec Asset
Management and a member of the Commodities and
Resources team. He has portfolio management
responsibility for the South African Resources Strategy
as well as the Global Gold Strategy and is responsible
for the analysis of South African gold shares.
Daniel joined Investec Asset Management in
September 1997 as a portfolio administrator before
moving to the research department in 1999 as an
investment analyst in the resources sector.
Daniel graduated from the University of Cape Town with
a Bachelor of Business Science (Honours) degree in
Economics and is a CFA Charterholder.
Updated
for 2012
Bradley George
George Chevely
Daniel Sacks
Page 38 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Scott Winship
Analyst
4 years with the firm
4 years of industry experience
Scott is an Analyst within the Commodities & Resources
team at Investec Asset Management focusing on
precious metals.
His career in investment management began with
internships during his university vacations at TriAlpha
Asset Management in the UK and BoE private clients in
South Africa. Scott holds a Bachelor of Business Science
Finance degree, with distinction and is a CFA
charterholder.
Updated to
2012
Graeme Baker
Analyst
3 years with the firm
6 years of industry experience
Graeme is an energy Analyst in the Commodities &
Resources team. He joined Investec Asset
Management in 2009 as an Institutional Client Manager,
working with some of Investec Asset Management’s
largest international clients and servicing clients with
commodities investments.
Prior to joining Investec Asset Management, Graeme
gained experience as an Investment Analyst at
Hargreaves Lansdown Asset Management. Graeme
graduated from the University of Bristol in 2006 with a
Bachelors of Science Honours degree in Economics.
Graeme holds the Investment Management Certificate
and is currently a level three candidate in the Chartered
Financial Analyst programme.
Updated to
2012
Dawid Heyl
Analyst
5 years with the firm
10 years of industry experience
Dawid is an Analyst in the Commodities & Resources
team at Investec Asset Management. He is primarily
responsible for screening the commodities and
resources investment universe with a focus on
generating investment ideas for agriculture and soft
commodities.
Before joining Investec Asset Management, Dawid
spent 15 months at KBC Financial Products as a trade
accountant within credit derivatives. Prior to this, Dawid
spent a year working as a financial manager in the
tourism sector, and three years at Greenwoods Auditors
in Cape Town where responsibilities included managing
audits of companies in the agricultural and industrial
sector.
Dawid graduated from the University of Stellenbosch
with a Bachelors Degree in Law in 2000. In 2001 he
completed the Accountants Conversion Course at the
University of Cape Town and in 2002 he graduated from
the University of South Africa with an Honours Degree
in Accounting. Dawid was awarded the Chartered
Accountant designation CA (SA) in 2005 and he is also
a CFA charter holder.
Updated to
2012
Biographies
Scott Winship
Graeme Baker
David Heyl
Page 39 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Simon Gardner-Bond
Analyst
1 year with the firm
8 years of industry experience
Simon is an Analyst in the Commodities & Resources
team, covering mining companies in both precious and
industrial metals.
Prior to joining Investec Asset Management, Simon
worked for Ocean Equities covering companies with a
focus on all metals, including bulk commodities (iron ore
and coal), base and precious metals as well as more
esoteric minor and rare earth metals. He previously
spent three years with Argent Partners Limited, a
London-based corporate finance boutique specialising
in the metals and mining industries.
Simon holds a BSc in Geology and Physical Geography
from the University of Liverpool, and an MSc and
Diploma in Mineral Deposit Appraisal (Mineral
Exploration) from the Royal School of Mines (Imperial
College).
Updated to
2012
Biographies
Simon Gardner-Bond
Tom Solomon
Investment Support Analyst
1 year with the firm
1 year of industry experience
Tom is an Investment Support Analyst within the
Commodities & Resources team at Investec Asset
Management. Tom originally joined the firm in 2011 on
the Trading Desk where most recently he was an Equity
Dealer focussing on North and South American
execution.
Previously Tom undertook two internships with
Macquarie Capital Advisors within the Financials
Institutions Group and Equity Capital Markets divisions.
Prior to this he was employed part time as a tax
accountant with Grech Smith Bridle for three years and
separately as a paralegal for the Australian
Communications and Media Authority.
Tom graduated from the University of Sydney with a
Bachelor of Commerce, majoring in finance and
accounting, in 2007 and Bachelor of Laws in 2009.
Since then he has gained the Investment Management
Certificate.
Tom Nelson
Energy Investment
Specialist
First year with the firm
7 years of industry experience
Tom is an Energy Investment Specialist in the
Commodities & Resources team at Investec Asset
Management. He joined Investec Asset Management in
London, after spending seven years at Guinness Asset
Management. Tom was part of the team that managed
the outsourced Investec Global Energy Fund from 2005
to 2008, and was subsequently instrumental in the
launch of the Guinness Global Energy Fund in 2008.
Tom was co-portfolio manager of the Guinness Global
Energy Fund with a specific responsibility for
exploration and production companies and was also co-
portfolio manager of the Guinness Thematic Equity
Fund from its launch in 2010. He was also co-portfolio
manager of the Guinness Energy Hedge Fund.
Tom holds the UKSIP Level 3 Certificate in Investment
Management and an MA in Modern Languages (French
and German) from the University of Oxford.
Page 40 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Biographies
Charles Whall
Energy Investment
Specialist
First year with the firm
31 years of industry experience
Charles is an Energy Investment Specialist in the
Commodities & Resources team at Investec Asset
Management. He joined Investec Asset Management in
London, having previously worked at Newton
Investment Management for 12 years where he led oil
and gas research, providing pricing models and a
thematic framework for investment within the sector.
Charles is the number one rated buyside Oil and Gas
Analyst in the Thomson Extel Survey for 2012. Prior to
this, Charles worked within the oil and gas industry,
initially at BNOC before moving to ARCO (subsequently
acquired by BP in 1999). In this role Charles held
various roles including oil reservoir management and
development. During his time at ARCO, Charles
completed an MBA and moved from engineering to
financial roles, including long-term financial planning,
mergers and acquisitions, long-term commodity
forecasting, optimising of financial and tax structure and
competitor analysis.
Charles graduated from the University of Leeds with a
BSc (Hons) in Civil Engineering. He also gained an
MBA at the University of Surrey and holds the
Investment Management Certificate.
Thank you www.investecassetmanagement.com
Page 42 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Important information GSY B
OEIC
This communication is not for general public distribution. If you are a private investor and receive it as part of a general circulation, please
contact us at +44 (0)20 7597 1900. The value of this investment, and any income generated from it, will be affected by changes in
interest rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to
the assets in which it invests. The Fund’s investment objective will not necessarily be achieved and investors are not certain to make
profits; losses may be made. Past performance should not be taken as a guide to the future. Performance would be lower had initial
charges been included and will vary between different share classes dependant upon their applicable charges. Returns to indiv idual
investors will vary in accordance with their personal tax status and tax domicile.
All the information contained in this communication is believed to be reliable but may be inaccurate or incomplete. Any opinions stated
are honestly held but are not guaranteed and should not be relied upon. This is not a buy, sell or hold recommendation for any particular
security. The portfolio may change significantly over a short period of time.
This communication is provided for general information only. It is not an invitation to make an investment nor does it consti tute an offer for
sale. The full documentation that should be considered before making an investment, including the Prospectus and Key Investor
Information Documents or Offering Memorandum, which set out the fund specific risks, is available from Investec Asset Management.
This communication should not be distributed to private customers who are resident in countries where the Fund is not registered for sale
or in any other circumstances where its distribution is not authorised or is unlawful. Please visit
www.investecassetmanagement.com/registrations to check registrations by country. For Funds registered in Switzerland, the Prospectus,
Key Investor Information Documents and Report & Accounts may be obtained free of charge from the Swiss Representative and Paying
Agent, RBC Dexia Investor Services Bank S.A., Esch-sur-Alzette, Badenerstrasse 567, P.O. Box 101, CH-8066 Zurich.
In the USA, this communication should only be read by institutional investors, professional financial advisers and, at their exclusive
discretion, their eligible clients, but must not be distributed to US Persons.
THIS INVESTMENT IS NOT FOR SALE TO US PERSONS.
Telephone calls may be recorded for training and quality assurance purposes. Issued by Investec Asset Management Limited, which is
authorised and regulated by the Financial Services Authority, October 2012.
Page 43 | Citywire Wealth Manager Retreat | CONFIDENTIAL
10719
Contact details
[ ]
[ ]
Tel: +44 (0) 20 7597 [ ]
Email: [ ]@investecmail.com
[ ]
Relationship Manager
Tel: + 44 (0)20 7597 [ ]
Email: [ ]@investecmail.com
Investec Asset Management
Woolgate Exchange
25 Basinghall Street
London
EC2V 5HA
United Kingdom
www.investecassetmanagement.com
Telephone calls may be recorded for training and quality assurance purposes.
Issued by Investec Asset Management, October 2012.