The rising oil price and the return of risk appetite pushed many oil shares higher during 2009. With sector conditions remaining benign, identifying the real stars of 2010 could prove more challenging, although with exciting exploration campaigns under way or about to start around the world, this year's winners are likely to be those most successful with the drillbit.
BP statistics show that the world has vast proved energy reserves of 1.3 trillion barrels of oil and 185 trillion cubic metres of natural gas. At current rates of usage, that's equivalent to over 40 years' usage of oil and over 60 years' usage of gas – even if we never find another barrel of either.
With such reserves to fall back on, one might question why oil and gas exploration is even necessary, particularly with the growing (albeit from a low base) contribution from renewable sources. The answer has two parts. First, usage will almost certainly not remain at current levels.
Second, an often-quoted industry mantra is that "the easy oil has been found", or at least the easy oil still accessible to western explorers has been found. BP statistics show that 86 per cent of global proved reserves lie under the control of Opec (Organization of Petroleum Exporting Countries) and Former Soviet Union countries. With a flourishing global oil services industry to provide technical extraction expertise where necessary, these countries no longer need to call in western major oil firms to help them develop their fields. If they do call in western majors, it's now more likely to be on contracts to increase production.
Saturday, 27 February 2010
Friday, 26 February 2010
The Investment Page: Spotlight on Multi Asset Funds
Investors desire to spread investment risk, coupled with a low interest rate environment in which it is difficult to get reasonable returns on cash, are two of the main reasons behind the increased popularity of 'multi-asset' funds.
The term 'multi-asset' refers to funds which invest across several asset classes and fund managers, which means investors are not exposed to the market gains or losses of just one asset class (or fund manager). Ultimately, multi-asset managers create the potential for capital growth and the conditions where the better performers may offset the poor performers.
The rationale is straightforward. No single asset class can be guaranteed to top the performance charts each year, so it seems prudent to have exposure to a broad mix of investments, including property, private equity, commodities and hedge funds. Relatively new as a concept, this new breed of multi-asset fund (brought about as a result of 'UCITS III' legislation) is a natural extension of the more traditional 'balanced' fund, which is restricted to invest in just two asset classes - equities and bonds.
Balanced funds grew in popularity in the wake of the stock market slump, triggered by the bursting of the dotcom bubble in the late 1990's. It is no coincidence then that multi-asset funds are proving so popular amidst the current market uncertainty. It is following such times that investors have become increasingly attracted to funds that can effectively act as a one-stop-shop for all of their investment needs.
Such funds are often referred to as 'core funds', the idea being that, given their diverse yet balanced remit, they account for the majority of the investment at the core of a portfolio, with other smaller, themed funds (known as 'satellite' funds) serving as an exposure to riskier assets. The notion is that a 'core' fund acts as a constant, stable base, whilst the 'satellite' funds are regularly re-assessed and changed in accordance with market trends. The 'core/satellite' approach is one that lends itself to medium to long term savings, such as pension provision or holdings in life assurance contracts.
There are obviously no guarantees, although basic theory around diversification suggests that investors can maximise their chances of making good returns over the long term by building a balanced portfolio that invests not just in a range of different equities, but in a variety of assets too. So, if one investment takes a dip - as invariably happens over the medium to long term- the whole portfolio doesn't get wiped out.
Steve Brann, manager of the Hansard Forsyth Wealthbuilder Balanced fund (X806 (EUR), B11(GBP) and C551 (USD)), available in HIL and HEL, commented on the outlook for his multi-asset fund in 2010 "Regardless of the prevailing shape of the current recovery, the unique nature of this crisis means volatility is likely to remain high whatever the trend direction.
If 2008 was the year of near apocalyptical collapse and 2009 the year of the rally on a rising tide of recovering confidence, then 2010 is likely to be a year of divergence and volatility. The rally in risk assets has been driven by an abundance of virtually-free central bank credit and unprecedented peacetime spending spree by governments.
The outlook for 2010 will vary depending on which country you are looking at. This year will be all about managing the exit of Quantitative Easing and will be the year for true asset allocators and multi-asset investors to come to the fore."
The term 'multi-asset' refers to funds which invest across several asset classes and fund managers, which means investors are not exposed to the market gains or losses of just one asset class (or fund manager). Ultimately, multi-asset managers create the potential for capital growth and the conditions where the better performers may offset the poor performers.
The rationale is straightforward. No single asset class can be guaranteed to top the performance charts each year, so it seems prudent to have exposure to a broad mix of investments, including property, private equity, commodities and hedge funds. Relatively new as a concept, this new breed of multi-asset fund (brought about as a result of 'UCITS III' legislation) is a natural extension of the more traditional 'balanced' fund, which is restricted to invest in just two asset classes - equities and bonds.
Balanced funds grew in popularity in the wake of the stock market slump, triggered by the bursting of the dotcom bubble in the late 1990's. It is no coincidence then that multi-asset funds are proving so popular amidst the current market uncertainty. It is following such times that investors have become increasingly attracted to funds that can effectively act as a one-stop-shop for all of their investment needs.
Such funds are often referred to as 'core funds', the idea being that, given their diverse yet balanced remit, they account for the majority of the investment at the core of a portfolio, with other smaller, themed funds (known as 'satellite' funds) serving as an exposure to riskier assets. The notion is that a 'core' fund acts as a constant, stable base, whilst the 'satellite' funds are regularly re-assessed and changed in accordance with market trends. The 'core/satellite' approach is one that lends itself to medium to long term savings, such as pension provision or holdings in life assurance contracts.
There are obviously no guarantees, although basic theory around diversification suggests that investors can maximise their chances of making good returns over the long term by building a balanced portfolio that invests not just in a range of different equities, but in a variety of assets too. So, if one investment takes a dip - as invariably happens over the medium to long term- the whole portfolio doesn't get wiped out.
Steve Brann, manager of the Hansard Forsyth Wealthbuilder Balanced fund (X806 (EUR), B11(GBP) and C551 (USD)), available in HIL and HEL, commented on the outlook for his multi-asset fund in 2010 "Regardless of the prevailing shape of the current recovery, the unique nature of this crisis means volatility is likely to remain high whatever the trend direction.
If 2008 was the year of near apocalyptical collapse and 2009 the year of the rally on a rising tide of recovering confidence, then 2010 is likely to be a year of divergence and volatility. The rally in risk assets has been driven by an abundance of virtually-free central bank credit and unprecedented peacetime spending spree by governments.
The outlook for 2010 will vary depending on which country you are looking at. This year will be all about managing the exit of Quantitative Easing and will be the year for true asset allocators and multi-asset investors to come to the fore."
The Investment Page: Dollar Falls
The dollar fell for the first time in three days on Wednesday against the euro on speculation that Bernanke will hold interest rates near zero to support growth in the world's largest economy. The dollar weakened versus 14 of 16 major counterparts.
The Investment Page: Gold Falls
Gold fell more than 1 percent to USD1,089.75 an ounce as a price slip below USD1,100 sparked technical selling, and amid caution ahead of Federal Reserve chair Ben Bernanke's congressional testimony later on Wednesday. "If, as we suspect, he maintains the clear stance to a loose monetary policy, the market will buy dollars on the hoped-for support this will give the economy," said Credit Agricole in a note.
The Investment Page: European Orders Rise
European industrial orders unexpectedly rose for a second month in December led by a surge in demand for capital goods such as machinery and equipment. Orders to industrial companies in the 16-nation euro area rose 0.8 percent from November, when they gained 2.7 percent, the European Union's statistics office said on Wednesday. The euro's 9.6 percent drop against the dollar in the past three months is making European exports more competitive just as the global economy gathers strength.
The Investment Page: China Stocks Rise
China's stocks rose for the first time in three days on Wednesday, led by power producers and health-care companies, as investors sought industries that would be most shielded against a slowdown in the economy. "The market is turning to defensive stocks with solid earnings prospects," said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. "The market is likely to be range bound given the government tightening."
The Investment Page: Hong Kong Economic growth Beats Expectations
Hong Kong's economic growth beat estimates in the fourth quarter and Financial Secretary John Tsang forecast an expansion of as much as 5 percent this year as he moved to counter the risk of a property bubble. Gross domestic product rose a seasonally adjusted 2.3 percent from the previous three months. "It is good that the government is taking a pre-emptive move before a risk in the property market forms," said Kelvin Lau, a Hong Kong-based economist with Standard Chartered Bank.
The Investment Page: Japan exports climb
Japan's exports climbed at the fastest pace in almost 30 years in January, supporting the nation's economic recovery as falling wages damp demand at home. Shipments abroad advanced 40.9 percent from a year earlier, the biggest increase since February 1980, the Finance Ministry said in Tokyo on Wednesday. The growth was led by the biggest advance in exports to China since 1985, while shipments to the U.S. increased for the first time in more than two years.
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