Natural Resource Funds: JP Morgan Natural Resources Vs Blackrock Gold and General

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Keeping a proportion of your portfolio in natural resources may be a bit of a no brainer, the fact that natural resources are limited by their very nature makes such investments attractive enough in times of economic prosperity.  However, as investors seek to park their money in safe assets such as precious metals in more turbulent times, such funds can also add defensive value to a portfolio.

However, the composition of such funds can be widely varied with different geographic focuses and different corporate compositions which result in a very diverse fund experience.  Here we will now look at two key funds linked to natural resources with very different focuses, JPM’s Natural Resources Fund and Blackrock’s Gold and General Fund.

JP Morgan Natural Resources Fund: Composition and Performance

Of the two funds, this is the older and more diversified dating back to 1965 and currently run by fund manager Ian Henderson.  The fund embraces a number of sectors including base metals, precious metals as well as investments in the energy sector.  Household names in the fund include Rio Tito (3.5%), Kinross Gold (2.0%) and Canadian Natural Resources (1.6%).  While the fund is fairly well diversified from a geographic perspective, the major concentration is in North America with 41.8% of the fund invested in Canada and the USA.  Other large beneficiaries of the fund include the UK at 24.7% and Australia with 16.6%.

From the performance perspective, the results have been mixed.  Over the past ten years investors have seen growth at a staggering 570.90%, a figure which falls to 38.97% in the past five years.  Looking specifically at the past five years a pattern emerges with the fund outpacing the sector average in positive years but doing worse than the average in more challenging times.  This still means however that the fund has outperformed the sector for three of the past five years in total.  Considering the cost of the fund, the fund has an initial charge of 4.25% and an annual management charge of 1.5%.

Blackrock Gold and General Fund: Composition and Performance

As for the focus of this fund, the clue is in the title with the fund giving a specific focus on gold and precious metals rather than a more diversified range of natural resources.  As such, the fund may be seen as having a much higher defensive value for those looking to hedge against economic uncertainty with precious metals related investments.

The fund has a strong track record and has been in existence since 1988 and is currently managed by Blackrock’s Evy Hambro.  For the sake of comparison, the fund is benchmarked against the FTSE Gold Mine sector.  In terms of composition the fund is invested in mining and related equities with 75.5% of the fund is invested in gold and other large investments in silver (11.2%) and platinum (4.5%).  In terms of companies, well known ventures include Newcrest Mining (8.0%), Goldcorp (6.0%) and Randgold Resources (5.6%).  Like JPM’s fund, there is a significant investment in North America with 53.6% of the fund being invested on the continent.  Other areas of investment include Europe (20.0%) and Australasia (9.5%).

Considering the performance of the fund, Blackrock’s offering has delivered growth of 87.5% over past five years compared to the sector average of 11.1%.  Generally, the fund has outperformed the relevant sector average, however this comes at a cost with a 5% initial charge and 1.75% annual management fee.

So if looking to invest in natural resources, both JPM’s Natural Resources Fund and Blackrock’s Gold and General Fund very different angles, both of which are worth considering.  For those looking for true diversification in one fund with slightly lower charges, then JP Morgan’s fund may be the better option.  On the other hand, if looking for a solid investment in precious metals, Blackrock’s Gold and General Fund may be more suitable option.