Lowell Resources Fund

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Mining and energy investment specialist Lowell Resources Funds Management is listing its 14-year old managed fund on the Australian Securities Exchange, giving a broader pool of investors access to its global portfolio of junior mining and energy companies.

The new listed investment trust, Lowell Resources Fund (ASX: LRT) will have around $26 million of funds under management. A third of its investments are Australian resources companies, with the rest in South America (27 per cent), Africa (16 per cent), North America (12 per cent), Central America (3 per cent), Europe (3 per cent) and Asia (1 per cent).

Its significant exposures are to gold producers (46 per cent of the portfolio), oil and gas (14 per cent), base metals (21 per cent) and battery metals (16 per cent).

Over 10 years to the end of last year, the fund has produced an average return of 10.4 per cent a year, compared with a fall in the S&P/ASX Resources Index of 1.3 per cent a year over the same period.

Over the past three years it has returned 21.9 per cent a year, compared with 10.5 per cent a year for the index. And last year it was up 20.7 per cent, compared with 25.7 per cent for the index.

Independent Investment Research says the fund is a high-risk investment proposition, with a concentrated portfolio of early stage, relatively illiquid junior resource companies and material concentrations in particular commodities, particularly gold.

“Leverage to commodity prices inherent in junior resources stocks accentuates share price movements,” IIR says. The fund has a long-term standard deviation of 27.2 per cent.

However, IIR likes the investment team, which it says has “diverse and directly relevant experience in the resources sector” and a strong network of contacts.

Chief investment officer John Forwood is a geologist with 25 years experience in resources financing and funds management and exploration.

Investment committee member David Hobday is a geologist with experience in oil and mineral exploration, corporate finance and investment going back to the 1980s.

IIR also likes the fact that, with a small amount of funds under management, “the manager can act quickly, decisively and materially in relation to investments at the small end of the resources sector.”

On the negative side, IIR worries that the investment process, while logical and proven, is “relatively informal” which creates a risk that analysis for prospective investments may not be comprehensive.

IIR also says the management expense ratio, at 2.16 per cent, is high. The fund also charges a performance fee of 17.9 per cent of returns above 10 per cent.

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