On August 28, 2008, the Sentry Select Precious Metals Growth Fund posted its 2008 semi-annual management report of fund performance for the period ending June 30, 2008 on SEDAR.com
The following are a few excerpts regarding the macro picture in metals and mining:
“On the back of declining markets, as a result of global economic and credit quality concerns, investor focus within the metal sectors has generally moved towards highly liquid, larger-capitalized senior equities in an effort to mitigate risk. As such, large-cap senior equities generally outperformed junior, smaller-capitalized equities through the interim period. While the Fund’s security weightings in senior large capitalized companies increased through the period, the majority of holdings resided in junior equity positions. During the interim period, the Manager continued to maintain defensive cash positions in an effort to mitigate risk during this volatile period. Increasing capital and energy costs, political risks associated with exploration, commodity price pressures and liquidity concerns relative to large-cap senior metal equities, negatively impacted holdings of junior and exploration companies within the Fund through the period. Quadra Mining, representing approximately 5.93% of the Fund’s NAV, led the senior metals & mining returns with a positive 20.4% return. SEMAFO representing approximately 6.47% of the Fund with a positive return of 33.7% offset some of the declines in the junior gold & silver.
Metal markets, for the most part, were negatively impacted by disinvestment and diminished prospects for global economic growth. Copper, molybdenum and many of the bulk materials (iron ore, coal) continued to be among the best-performing commodities. Transportation bottlenecks, severe weather events and labour-related mine disruptions, combined with continued demand growth from Asia and emerging markets, supported prices of these metals and minerals during the period. Nonetheless, underlying equities within the portfolio generally experienced price declines. Metals such as nickel, zinc and lead have fallen 35% – 60% from their highs as a result of above average supply growth in 2008 combined with manufacturer destocking as tightened credit lead to a more cautious outlook. The price of uranium tumbled from U.S. $90 per pound in early January to close at U.S. $58 per pound at June 30, 2008. The willingness of nuclear utilities to pay for increased enrichment of yellowcake (a uranium concentrate) to fulfill nuclear fuel needs decreased demand through the period. The Fund reduced uranium holdings as risk-reward potential in the sector declined. Gold market fundamentals remain constructive for an ongoing bull market. The deteriorating U.S. dollar outlook, including sharply negative real rates, continued production declines in global gold output and the need to stimulate scrap supply with higher prices to meet fabrication (jewellery) demand suggest a long term bull market for gold.
In general, mining equity valuations are pricing in a sustained decline in metal prices in an environment of tight inventories and modest supply growth. The Manager believes that the prices of focus metals for the portfolio (gold and silver) should bottom in 2008, aided by China’s decision to accelerate economic growth after a period of restraint.”
In my opinion, Kevin MacLean, manager of the Sentry Select Precious Metals Growth Fund belongs in the crème de la crème of resource fund managers. His astute knowledge of the resource sector and uncanny stock picking ability has not only guided the Sentry Select Precious Metals Growth to be the winner of 2007 and 2008 Canadian Lipper Fund Award for the best risk-adjusted performance (over three years) in its category but the fund has also been a top performer in the precious metals category in 2005, 2006 and 2007, according to Morningstar. Hey Kevin, how come you haven’t departed the world of mutual funds for hedgie land?
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Last update : 27-11-2008 08:30
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