Gold and copper are the two largest exposures in the £1.8bn BlackRock World Mining investment trust, with long-serving fund manager Evy Hambro saying the fundamentals of both assets remain strong,
In the case of copper, for instance, there is fundamental demand for renewable energy and data centres.
Hambro told FT Adviser: “Around 40 per cent of the assets are in gold, with 25 per cent in diversified mining companies such as Rio Tinto, and 16 per cent in dedicated copper miners, but when you count in the share of copper that comes from the diversified miners, then its 25 per cent.
“There has been a temptation in recent years to denigrate mining as ‘old economy’ stocks, but the reality is, without commodities such as copper there is no renewable energy, there are no data centres.”
When it comes to gold he said he remained “hugely positive on the price, and there is huge value in the equities as they didn’t rise by as much as the commodity price.”
When running the trust, Hambro considers the macro economic perspectives of the wider Blackrock business to inform his views on issues such as inflation which impact commodity prices.
The next step is to select stocks within that framework. He said there were always some very small mining stocks within the portfolio, including assets exposed just to the royalties paid by some mining assets, and companies which have yet to IPO.
Up to 20 per cent of the trust’s capital can be invested in this way, but he has never made use of all of that option, with the highest allocation ever being 9 per cent.
The trust is run very much with income in mind, Hambro said. “The vast majority of the returns from commodities come from income, so we are very conscious of that, and we use derivatives to augment the income.”
BlackRock World Mining investment trust has returned 86 per cent over the past five years and has a dividend yield of 2.4 per cent.
