Investing in commodities and further afield in 2011 Go compare with our comparison table

Investing in commodities and further afield in 2011

11 January 2011 / by Paul Dicken

With emerging markets seeing high levels of growth in 2010, some fund managers are looking further afield for new growth stories, while commodities look set to remain in the spotlight. Head of savings and investment, Nick Scarrett, looks at the investment year ahead for frontier markets and the outlook for oil and metals.

Commodity Funds

Commodity funds have had a good number of years and in 2010 investment headlines have been made with huge rises in the value of gold, oil and copper. Many economists see commodity prices gaining further ground in 2011 as above average global GDP bolsters demand, led by the emerging market economies.

Emerging market economies are particularly commodity-intensive and China and India have 2011 GDP predictions of 9.0% and 8.7% respectively. Therefore the combination of growing demand and finite resources should lift prices further. However any faltering in the emerging market economies, or an increased threat of a global double dip recession, however unlikely, could have a negative impact on prices.

Emerging Markets and Frontier Markets

The success of the emerging markets sector over the past five years is predicted to continue into 2011 and beyond, especially if you read the predictions for global economic growth in coming years.

As the BRIC countries – Brazil, Russia, India and China – and other leading emerging markets become ever more established some fund managers are looking further afield for the next wave of global growth.

This next wave of growth is predicted to come from countries such as Argentina, Kuwait, Oman, Kenya and Nigeria.

Fund Manager Blackrock is predicting a great 2011 for Frontier Markets, which include nine of the top ten fastest economies in the world. BlackRock recently launched a frontier markets investment trust.

Research by Swiss & Global Asset Management predicts annual growth of over 11% per annum over the next ten years and points to a low correlation with both developed and emerging market economies.

There is definitely potential for rises in frontier markets with falling share valuations since 2008, low debt burden, and favourable demographics. However, the sector is not for the faint hearted with low share liquidity, currency risk and potential political instability.

While investor opportunities in frontier markets are likely to grow as markets become more established, some emerging market funds may provide exposure to less established emerging or frontier markets, such as Argentina. The Neptune Africa fund invests in both Kenya and Nigeria, with the majority of its holdings in South Africa.

A range of investment funds and trusts are available through Fair Investment. See the Investment Funds section for further information on specific funds.

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The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors. Past performance is not a guide to future performance.

Investors in emerging market funds should be prepared to accept a higher degree of risk than for a fund with a broader investment mandate, as difficulties in dealing, settlement and custody could arise. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the investment Factsheet.

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Commodity Funds
Fund ManagerFundSectorFactsheetMore info
BlackRock Gold & GeneralSpecialistFactsheetMore Info >
This is a specialist unit trust which aims to achieve long term capital growth by investing in gold mining and precious metal-related shares. It tends to be volatile and is particularly suitable for diversification in a larger portfolio. See latest fund factsheet for details.
First State Global Resources Fund SpecialistFactsheetMore Info >
Aims to achieve capital growth by investing in the natural resources and energy sectors globally. Save 100% on initial fund charges.
JP Morgan Natural ResourcesSpecialistFactsheetMore Info >
The Fund aims to invest primarily in the shares of companies throughout the world engaged in the production and marketing of commodities. The fund aims to provide capital growth over the long term.See latest fund factsheet for details.
Fidelity Multi Asset Strategic Cautious ManagedFactsheetMore Info >
The Fund aims to provide moderate long-term capital growth by investing in a range of global assets providing exposure to bonds, equities, commodities, property and cash. See latest fund factsheet for details.
Multi Manager DiversityCautious Managed FactsheetMore Info >
The Fund aims to achieve long-term capital growth in excess of inflation through investment in a portfolio which gives exposure to a wide range of asset classes and geographic regions. See latest fund factsheet for details.

The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.