Specialist funds such as Investec Global Gold, Invesco Perpetual Global Financial Capital and Sarasin Food & Agriculture Opportunities are well-respected by investment analysts but remain relatively off-the-radar for most investors. 
By its very nature, the IA Specialist sector is a mixed bag of funds as it is home to funds that do not fit into the mainstream peer group. Within it are funds with focused geographical remits such as Latin America or Africa, those looking at commodity stocks, portfolios based around a single sector like energy, and a host of other mandates.
While the niche approach taken by the sector’s members means it is often overlooked by some investors, the peer group is home to some giant members – including the £7.6bn Stewart Investors Asia Pacific Leaders, £6.8bn Baillie Gifford Diversified Growth and £4.4bn BlackRock GF World Mining funds.
In this article, however, we are looking at the smaller members of the IA Specialist sector (those with assets under management of less than £200m) that have been backed by the analysts at FE Invest and Square Mile Investment Consulting & Research.
Investec Enhanced Natural Resources
Starting with the smallest of the five highlighted portfolios, the £78m Investec Enhanced Natural Resources fund is a member of the FE Invest Approved List thanks to its cautious approach to commodities investing and the track record of its managers.
Performance of fund since launch
Source: FE Analytics
The fund is run by George Cheveley – who holds FE Alpha Manager status – and Tom Nelson; the managers’ process spends a great deal of time attempting to understand the drivers of underlying commodities while their stock selection attempts to identify relationships between an individual stock and its underlying commodity exposure.
“Investec takes a process-heavy research approach and, although the fundamental aspects of the process don’t change, it is constantly evolving it to avoid any biases in the resulting portfolio. The team focuses on the medium term and, based on its views of the future direction of commodity prices, it can determine whether a company is suitable for the portfolio or not with various returns-focused score cards,” the FE Invest team said
According to its latest factsheet, the fund’s biggest exposure is currently to diversified metals & mining at 20.5 per cent of assets, followed by integrated oil & gas (17.5 per cent) and steel (12.8 per cent). BHP Billiton, Royal Dutch Shell and Teck Resources are its largest holdings.
Investec Enhanced Natural Resources has a 0.90 per cent ongoing charges figure (OCF).
Investec Global Gold
Next up is the £94.6m Investec Global Gold fund, which is also managed by FE Alpha Manager Cheveley alongside Hanre Rossouw. This fund is liked by the FE Invest team for similar reasons to Investec Enhanced Natural Resources as its process shares the many elements.
Cheveley and Rossouw believe that gold mining equities can outperform the price of gold bullion over time thanks to the fact that companies can reduce their costs and increase margins to boost profits ahead of the yellow metal’s performance.
Performance of fund since launch
Source: FE Analytics
“Due to the preference for equities over gold bullion the fund typically outperforms the gold price when the precious metal rises but underperforms when the gold price drops – that is, the fund is more sensitive to change in the price of gold. Currently the team believes uncertainty surrounding global growth will help support the gold price,” the FE Invest team said.
Some 89.9 per cent of the fund’s assets are in gold producers but it also has 7.9 per cent in silver and small allocations to platinum and gold bullion; geographically it is most exposed to Canada (59.9 per cent). Barrick Gold, Newmont Mining, Newmont, Evolution Mining and Kinross Gold are the biggest individual holdings.
Investec Global Gold has a 0.89 per cent OCF.
Invesco Perpetual Global Financial Capital
Moving away from natural resources, the analysts at Square Mile like the £95.3m Invesco Perpetual Global Financial Capital fund, giving it an ‘A’ rating.
Managed by Julien Eberhardt, the fund concentrates on the debt issued by banks and other financial institutions globally although it does hold some equities. The largest bond issuers in the portfolio at present are Lloyds, Royal Bank of Scotland, HSBC, Nationwide and Deutsche Bank.
Performance of fund since launch
Source: FE Analytics
“The fund is likely to be suitable for investors wishing to take advantage of the opportunity available in the financials sector as institutions continue to restructure,” Square Mile’s analysts said.
“The nature of the investments in the fund mean that there may be a substantial degree of capital volatility over the short to medium term, with the fund likely to perform well in an environment of investor optimism, but to lag in times of weaker market performance. Over the longer term we expect the fund to capitalise on the opportunities available, and performance of the fund since launch has been very strong.”
Invesco Perpetual Global Financial Capital has an OCF of 0.77 per cent and is yielding 4.31 per cent.
Allianz Global Agricultural Trends
The fourth highlighted specialist product is the £114.6m Allianz Global Agricultural Trends fund, which is headed up by Bryan Agbabian. It focuses on companies that profit directly or indirectly from developments in areas such as the production, storage and transport of agricultural commodities as well as the processing and sale of foodstuffs and beverages.
When seeking holdings, Agbabian divides his investment universe into two halves: upstream companies that benefit from tighter supply and rising commodity prices such as farm equipment makers or seed producers and downstream companies that benefit from increased supply and falling commodity prices like retailers or food processers.
Performance of fund since launch
Source: FE Analytics
The FE Invest team, which has the fund on its Approved List, said: “Bryan Agbabian has designed an innovative approach to investing through the agricultural value chain, using a system that is less risky than just investing directly into commodities. It does not require investors to have a positive view on commodity prices as the fund should be able to benefit from both a rising and falling environment.”
Top holdings at present include agricultural equipment manufacturer Deere & Co, fertiliser firm CF Industries and Calavo Growers, which packages and distributes avocados and other fruits. Three-quarters of the portfolio is in the US, with smaller allocations to Japan, Australia and Norway.
Allianz Global Agricultural Trends has a 1.23 per cent OCF.
Sarasin Food & Agriculture Opportunities
The biggest fund on the list is the £163.3m Sarasin Food & Agriculture Opportunities fund, which is run by FE Alpha Manager Henry Boucher with Jeneiv Shah as deputy. The fund also holds five FE Crowns.
Although the fund invests in both the food and agricultural sectors, it has a bias towards food and is therefore more focused on the consumption trends of the space rather than production. This is because the team behind the fund believe the most opportunities for consistent returns is found at the consumer-end of the food chain.
Performance of fund since launch
Source: FE Analytics
On a geographic level, 25.1 per cent of the fund’s US assets are in North America, 23.3 per cent are in the UK and 19.9 per cent in emerging markets. Treasury Wine Estates, China Mengniu Dairy, Marine Harvest, Deere & Co and Ocado are some of the largest holdings.
“It is achieving a lower level of volatility than other funds in the agriculture space and continues to perform well and, in doing so, proves the strategy works,” the FE Invest team said. “The fund offers a diversification benefit to a portfolio by investing in food and agriculture with the added bonus of less volatility than its peers.”
Sarasin Food & Agriculture Opportunities has a 0.99 per cent OCF.