5 November 2009Martin Currie sees opportunities in recent energy sector weaknessGlobal Energy Fund increases exposure to oil services and refiningSince launch at the end of March 2009, managers
Ruairidh Stewart and
Duncan Goodwin have significantly changed the sector positioning of the Martin Currie Global Energy Fund. Exposure has been increased to oil services and refining and they are now increasingly selective about exposure to exploration and production and integrated oil and gas companies.
The Martin Currie Global Energy Fund is an unconstrained fund, run on a high conviction best ideas basis with 30-50 active positions. Martin Currie has one of the most experienced and well-respected teams in the industry. The £40million fund at launch was modelled on the energy portfolio of the award winning Martin Currie GF Global Resources Fund which has recently been awarded a superior rating by Morningstar.
Commenting on the changes, co-manager of the fund,
Ruairidh Stewart said:
"The fund is now in an interesting position, owning few of the biggest index players and looking very different to what you would expect from the 'classic' energy fund. We are very selective on major oils because, as a group, they have lagged the recovery as other higher beta areas have caught our attention and this has proved to be the right call. As we look forward, however, there is value in some stocks that could be worth another look if management can highlight mispriced assets. As an unconstrained fund, if we don't like a company we don't hold it, regardless of its index weightings.
"BP is the largest position in the fund. The company is one of the top 10 components of MSCI World and one of the most widely covered by analysts. Yet we believe that BP's operational improvement has been underestimated by the market. This certainly seemed to be the case when recent results beat expectations by close to 50%. This contrasts with ExxonMobil, the largest component in the index, which missed expectations for quarter 3 results - the fifth quarter where it disappointed. I am pleased to say we don't own ExxonMobil in the fund.
"We've increased exposure to oil services. The challenges faced by large cap integrated oil also have important indirect implications. If they are to deliver volume growth, projects need to be sanctioned. One company's expenditure is another's revenue. While the market was concentrating on large integrated oils in the second quarter, we chose to look further down the value chain. Companies such as Amec, SBM Offshore and Technip stood to gain from an upswing in capital expenditure if the oil majors were to try to meet their targets for volume growth."
Commenting on the refining sector, co manager of the fund,
Duncan Goodwin said: "We are seeing positive change in the refining sector. The collapse in margins over the previous 12 months had led to a tightening of supply, as 40% of potential new capacity for 2010 had been put on hold. The market appeared to be capitulating to the downside just as industry fundamentals were getting better. Diesel supply trends are clearly improving, while we see a real risk in gasoline margins."
Commenting the outlook Duncan added: "After a significant retrenchment in the share prices of energy companies, we believe this is an excellent time to invest in this part of the market. Not all energy companies, however, will benefit equally: with credit conditions tight, returns both within and across sectors are likely to diverge sharply - the perfect environment for active bottom-up stockpickers."
For further information please contact:Amy Fisher -
afisher@martincurrie.com Tel: +44 (0)131 229 5252
Mobile: +44 (0)7825 971 421
