Alma Recurrent Global Natural Resources Fund
- Alma Recurrent Global Natural Resources Fund invests primarily in publicly traded equity and debt securities of global natural resource-related companies, operating in a capacity related to the supply, production, distribution, refining, transportation and consumption of natural resources.
- The fund’s management is delegated to Recurrent Investment Advisors LLC.
Cumulative Performance (%)
Fund Inception 29 June 2018
The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance quoted. The investment return and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
Strategy & Manager
The fund invests primarily in publicly traded equity and debt securities of global natural resource-related companies, operating in a capacity related to the supply, production, distribution, refining, transportation and consumption of natural resources.
Recurrent Investment Advisors LLC is an SEC regulated entity located in Texas and created in 2017. Cofounders Mark Laskin and Brad Olsen both benefit from a significant track record in similar strategies.
Mark Laskin, Co-founder and Managing Director
Before founding Recurrent Investment Advisors, Mark was the lead energy portfolio manager and Chief Investment Officer at BP Capital Fund Advisors (BPCFA), an energy-focused long-only investment management firm.
Under Mark’s leadership, BPCFA grew from $50mm to nearly $400mm in assets under management in less than 3 years. BPCFA’s energy strategy was the #1 performing energy open-end mutual fund, as ranked by Morningstar, from 12/31/13 to 12/31/16, and its MLP strategy was in the top decile in its Morningstar category over that same time period.
Mark has 13 years of additional portfolio manager experience at Van Kampen, Morgan Stanley and Invesco. As part of a diversified large cap value strategy, Mark managed more than $10 billion and has managed energy portfolios for more than 12 years. While at Morgan Stanley Investment Management, Mark served as the internal head of equity investment research.
Mark earned an MBA/MA in Finance from the Wharton School of Business at the University of Pennsylvania and a BA in History from Swarthmore College
Brad Olsen, Co-founder and Managing Director
Before founding Recurrent Investment Advisors LLC, Brad was the lead MLP portfolio manager for BP Capital Fund Advisors (BPCFA). Under Brad’s leadership, MLP AUM more than doubled (excluding the impact of appreciation).
From 2011 to 2015, Brad led Midstream Research for Tudor, Pickering, Holt & Co. (TPH & Co.), where he was recognized as the top all-around stock picker in the US by the Financial Times in 2013, and the top energy stock picker in the US by Starmine in 2014.
Brad also has experience as an investment analyst at Eagle Global Advisors in Houston, where he was part of a 3-person team that grew midstream/MLP AUM from $300mm to over $1bn from 2008 through 2011. He has also worked in investment roles at Millennium International and Strome Investment Management. He began his career in the UBS Investment Banking Global Energy Group in Houston.
Brad earned a BA in Philosophy, Political Science, and Slavic Studies from Rice University in Houston.
Statistics & Commentary
The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
Sector Breakdown as a % of AUMas of 31/10/2018
Geographical exposure as a % of AUMas of 31/10/2018
Portfolio Characteristicsas of 31/10/2018
|No. of securities||40||90|
|Estimated Long Term Growth||10.1x||8.4x|
|Price to Book Ratio||1.5x||1.4x|
|Price to Sales Ratio||1.4x||0.8x|
|Weighted Market Cap ($bn)||47.3||71.1|
|Median Market Cap ($bn)||15.4||17.1|
|Active Share (%)||80.6||-|
Top 10 Position Detailsas of 31/10/2018
|Security name||Sector||% AUM|
|Total SA-Spon ADR||Oil, Gas & Consumable Fuels||4.22|
|Glencore PLC||Metals & Mining||4.21|
|Barrick Gold Corp||Metals & Mining||4.15|
|Fortescue Metals Group Ltd||Metals & Mining||3.98|
|UPM-Kymmene OYJ||Paper & Forest Products||3.97|
|Exxon Mobil Corp||Oil, Gas & Consumable Fuels||3.96|
|Vale Sa-Sp Adr||Metals & Mining||3.91|
|Halliburton Co||Energy, Equipement & Services||3.70|
|Wildhorse Resource Development||Oil, Gas & Consumable Fuels||3.67|
Investment Manager's Commentaryas of 31/10/2018
Market Review and Outlook
During the month of October, the Recurrent Natural Resources strategy fell by -9.70%, compared to the S&P Global Natural Resources Index’s -9.09% return. During the course of the month, the price of oil, as measured by West Texas Intermediate (WTI), fell by nearly 11%, the largest monthly fall since July of 2016. Exploration and Production (E&P) companies particularly fell during the quarter, since their profitability is largely determined by the oil price. The E&P sector within the benchmark fell by nearly 15%, and within the portfolio, holdings Oasis Petroleum and Newfield Exploration each fell by more than 29% during October.
Natural Resources Portfolio Review
From a bottom-up perspective, our process is designed to identify and invest in undervalued companies, which we believe will be recognized by the market to return stocks to their intrinsic values. While in many cases, markets identify the value in companies, but in other cases, companies recognize unique value opportunities in other companies, and make corporate acquisitions. In the last several weeks, two portfolio companies – Wildhorse Development Corporation (WRD) and Barrick Gold (ABX) announced transformative transactions. Wildhorse was acquired by Chesapeake Energy, and Barrick Gold acquired Randgold Resources. Since the announcements, both stocks have performed well, with Barrick Gold up 14% in the face of the broader natural resources index falling 13% since the announcement, and Wildhorse Development rising 8% on the day of the announcement, outpacing the broader index by several percent. The trend continued in the days after the end of the month, when Encana Corp (ECA) agreed to acquire portfolio holding Newfield Exploration (NFX).
We continue to see significant value in E&P stocks within the portfolio. Broadly, the sector implies commodity prices well below current levels. In comparison to other segments of the natural resources investment universe, E&P companies directly benefit from high commodity prices and oil services costs which remain relatively under control.
The combination of high oil prices and a strong dollar…..make for higher oil prices around the world
During the month, the impact of US sanctions against Iran attracted significant attention as it pertains to oil prices. Given the potential loss of Iranian barrels from the global oil market, many market analysts forecasted the oil price to rise. As we frame the conversation, we feel as though a return to our white paper on the changing shape of energy cycles helps to shape our thought process. In it, we compared the global energy market to unregulated power markets in the US. In unregulated power markets, plants in a given region are ranked by their cost, as seen in the figure below. Then, in a given hour, the cost of the power plant that matches supply and demand serves to set the price for the entire market. Each hour, as demand changes, different power plants serve to match supply and demand, thereby setting the price of power for the entire market. This “dispatch curve” framework is important when considering how the absence of some portion of Iranian oil from the global oil market will impact price.
Near-term, global oil demand typically weakens in autumn due to the end of summer driving season and relatively mild temperatures before winter. Additionally, as we highlighted last month, dollar strength increased the cost of oil in local currency terms, further impairing global demand. At the same time, from a supply perspective, Iranian barrels – which are situated in the middle of global cost curve – must be replaced by higher cost barrels such as those from US shale basins.
In the current environment, slight perceived changes in global supply and demand have profound impacts on short term oil prices. For example, throughout September, due to well telegraphed sanctions, as many as 1 million Iranian barrels per day were expected to disappear from the market, which caused oil prices to increase in order to incentivize barrels to be produced across a number of basins. In October, and into November, as exemptions from the sanctions were granted and the global economy weakened, US crude oil production increased. With more than 400,000 barrels per day of global growth in the month of August alone, supply increased just as global demand peaked, from both a seasonal and secular perspective.
Importantly, in comparison to a decade ago, a globally significant number of barrels can turn off and on in US shale within a matter of months. While there are various sources of supply with similar cost structures that could contribute to filling the gap left by Iranian sanctions, the strong elasticity of US shale oil supply is noteworthy. Shale’s elastic, rapid-response nature should cause prices to incrementally rise, but not to cause the price spike or a sustained trough that some market analysts suggest. We continue to believe oil prices will remain relatively rangebound, at prices similar to, or slightly higher than, current prices.
Facts & Documents
Fund Domicile: Luxembourg
Management Fee: 0.95% p.a. for I shares
Fund Type: UCITS SICAV
Fund Launch: 29 June 2018
Base Currency: USD
Depositary, Administrator, Transfert Agent: BNP Paribas Securities Services (LU)
Dealing: Each day with a 1-day notice
Cut-off time: 12 pm CET
Management Company: Alma Capital Investment Management (LU)
Investment Manager: Recurrent Investment Management (LU)
Fund Managers: Mark Laskin & Bradley Olsen
Countries where the fund is registered:
Institutional USD Capitalisation share class
ISIN: LU1823602369 Ticker: ARGNIUC LX Launch: 29 Jun 2018
Institutional EUR Capitalisation share class
ISIN: LU1845388146 Ticker: ARGNIEC LX Launch: 29 Jun 2018
available upon request