JP Morgan Natural Resources Fund

Andy Parsons, Advice team manager at The Share Centre, explains how investors looking for long-term growth and exposure to the natural resources sector could benefit from the JP Morgan Natural Resources fund.

"When investors choose to invest in natural resources one of the first things they must consider is whether they want to invest directly in the physical commodities themselves, or indirectly via companies involved with the overall operations.

"The JP Morgan Natural Resources fund is very diverse, investing in a wide range of companies spanning base materials as well as energy, gold and other precious metals and minerals. As the fund invests in companies exposed to these sectors, it tends to have a higher degree of liquidity compared to direct investment into the physical product.

"2008 proved to be a tough year for commodity prices as the ‘commodity bubble' burst, inevitably impacting both individual companies and funds alike. Having struggled last year, the JP Morgan Natural Resources fund has rebounded during 2009 and year to date it currently ranks first quartile with a return of 62.05%.

"The fund's manager, Ian Henderson continues to strongly defend the demand for commodities taking into account supply and demand fundamentals. However, there is a note of caution that the recent rally might lead to some short-term volatility, a view that we would agree with.

"Henderson remains optimistic for some key sectors in 2009, particularly gold. The fund is 32.5 per cent invested in gold and precious metals. The gold price has continued to soar and is currently at its highest level since February 2009, demonstrating its attraction as not only a defensive commodity, but as a hedge for any short-term economic deterioration.

"Ian Henderson has over 25 years experience in the natural resources sector. He has been managing the JP Morgan Natural Resources fund since October 2000. The fund has returned 147.12 per cent over the last five years on a cumulative basis to 4 September 2009. Henderson aims to invest in companies throughout their life cycle, from discovery, pre-production to reserve definition.

"This fund is suitable to those investors who are willing to accept additional risk and want to diversify their portfolios towards natural resources. This fund offers great potential to boost a core portfolio, provided they are comfortable with a higher level of risk. As this is a specialist based fund it should not make a large proportion of an investor's portfolio."