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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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SICAV

Global Natural Resources Equity Fund

Seeking to identify long-term global winners in the arena of natural resources extraction and production.

ISIN LU0272423913 Bloomberg TRPGNRI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

7.37%
$120.0m

1YR Return
(View Total Returns)

Manager Tenure

53.10%
<1yr

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.02
6.21%

Inception Date 15-Nov-2006

Performance figures calculated in USD

31-Oct-2021 - Shinwoo Kim, Portfolio Manager ,
We continue to believe that we are in the middle of a secular downcycle for commodities. Despite the recovery in oil prices, productivity gains continue, pressuring the cost curve and challenging the long-term outlook for energy stocks. We remain committed to our philosophy of buying and holding a diverse selection of fundamentally sound natural resources companies.
Shinwoo Kim
Shinwoo Kim, Portfolio Manager

Shinwoo Kim is the portfolio manager for the Global Natural Resources Equity Strategy, including the New Era Fund. He is the president and chairman of the fund’s Investment Advisory Committee. In addition, Shinwoo is a member of the Investment Advisory Committees of the US Large-Cap Value Equity and US Large-Cap Equity Income Strategies. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

A massive productivity wave in U.S. shale, which collapsed cost curves, began in 2011 and prompted a secular bear market in oil that has since extended to other commodities. Commodity cycles tend to last 15 to 20 years on average, and we continue to believe that there is more room for productivity to improve and for the bear market to persist. The secular dynamic of productivity-driven oil price deflation was exacerbated in early 2020 by dual demand and supply shocks hitting the market, creating unprecedented pressure on market balance and ultimately driving West Texas Intermediate (WTI) prices briefly negative in a clear signal that oil production needed to be swiftly and meaningfully curtailed.

The global spread of the coronavirus effectively shut down many large economies around the world and sent oil demand negative for the first time since the 2008 global financial crisis. This negative demand shock far exceeded any weakness previously seen in oil, but it does not take long to rebalance the market. Historical data show that oil prices overshoot to the downside after demand shocks as supply curtailments initially lag falling demand; conversely, supply lags in response to demand recovery, allowing oil prices to overshoot to the upside before normalizing. We are seeing that play out now as oil spot prices overshoot the incentive curve. Predicting the magnitude and duration of this overshoot is complicated by multiple exogenous factors such as weather, geopolitics, and the lingering pandemic impact on supply against low gas and coal inventories in Europe and Asia heading into winter. Nevertheless, we continue to expect a normalization of prices as some of these exogenous factors reverse and productivity continues to improve, thus requiring increasingly less capital to meet demand over time. We have maintained our disciplined approach and will follow what the data tell us. We remain focused where we have an investment edge; specifically in the multi-year structural commodity call.

We remain committed to our data-driven, bottom-up stock selection process and our philosophy of buying and holding a diverse selection of fundamentally sound natural resources companies with solid balance sheets and talented management. Our expansive global research platform continues to assist in identifying those companies that can provide long-term capital appreciation for our clients, and we believe the market will reward our disciplined and consistent approach to investing over the long term.

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a widely diversified portfolio of stocks of natural resources or commodities-related companies. The companies may be anywhere in the world, including emerging markets.

Investment Approach

  • Focus on well-managed companies that own or develop natural resources and other basic commodities with attractive long-term supply-demand fundamentals.
  • Invest in companies that operate “downstream” from these resources, e.g., refining, paper manufacturing, steel fabrication, and petrochemicals.
  • The portfolio invests in resource companies on a global basis including — international energy, forest products, mining, and commodities.
  • Assessment of resource/commodity cycle, industry valuation, and company fundamentals is key.
  • Broadly diversify holdings to manage portfolio risk profile relative to highly concentrated energy or gold strategies.
  • Environmental, social and governance ("ESG") factors with particular focus on those considered most likely to have a material impact on the performance of the holdings or potential holdings in the funds’ portfolio are assessed. These ESG factors, which are incorporated into the investment process alongside financials, valuation, macro-economics and other factors, are components of the investment decision. Consequently, ESG factors are not the sole driver of an investment decision but are instead one of several important inputs considered during investment analysis.

Portfolio Construction

  • Typically 90-120 securities
  • Positions typically range to 5%
  • Reserves typically range from 0% to 5%

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Fund % 53.10% 7.37% 6.18% 2.58% 6.59%
Indicative Benchmark % 68.07% 6.42% 6.09% 2.72% 10.08%
Excess Return % -14.97% 0.95% 0.09% -0.14% -3.49%

Inception Date 15-Nov-2006

Manager Inception Date 31-Aug-2021

Indicative Benchmark: MSCI World Select Natural Resources Index Net

Data as of 31-Oct-2021

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 38.29% 1.54% 4.03% 3.64%
Indicative Benchmark % 52.74% 0.38% 4.27% 3.62%
Excess Return % -14.45% 1.16% -0.24% 0.02%

Inception Date 15-Nov-2006

Indicative Benchmark: MSCI World Select Natural Resources Index Net

Data as of 30-Sep-2021

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 01-Dec-2021 Quarter to DateData as of 01-Dec-2021 Year to DateData as of 01-Dec-2021 1 MonthData as of 31-Oct-2021 3 MonthsData as of 31-Oct-2021
Fund % 0.41% 4.06% 20.33% 7.12% 6.66%
Indicative Benchmark % -0.21% 0.54% 25.07% 6.68% 9.66%
Excess Return % 0.62% 3.52% -4.74% 0.44% -3.00%

Inception Date 15-Nov-2006

Indicative Benchmark: MSCI World Select Natural Resources Index Net

Indicative Benchmark: MSCI World Select Natural Resources Index Net

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Index returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 July 2018, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly. 

31-Oct-2021 - Shinwoo Kim, Portfolio Manager ,
Commodities rallied in October, led by energy-related companies. Crude oil prices continued to rise amid increased demand and restrained supply, while natural gas and coal prices pulled back, albeit modestly, given unseasonably high temperatures and government intervention in Europe and China after record price hikes. Most diversified metals advanced, but aluminium prices cooled off as falling thermal coal prices in China eased supply concerns. Specialty chemicals benefitted from strong end-market demand, while crop chemicals enjoyed inflated prices given rising input costs. Most agricultural commodities also moved higher. In the portfolio, our overweight allocation to the paper and forest products industry hurt relative performance. Within the segment, certain packaging names lost ground due to disappointing box shipment data and potential supply growth from a new entrant. Stock selection in the electrical components and equipment industry was also a source of weakness as our holdings lagged names levered to solar technology, although the negative impact was partly offset by a favourable overweight allocation. Conversely, our holdings in oil and gas equipment and services performed well and added value.

Holdings

Total
Holdings
103
Largest Holding ConocoPhillips 4.80% Was (30-Jun-2021) 3.39%
Other View Full Holdings Quarterly data as of  30-Sep-2021
Top 10 Holdings 29.02% View Top 10 Holdings Monthly data as of  31-Oct-2021

Largest Top Contributor^

ConocoPhillips
% of fund 4.77%

Largest Top Detractor^

Boliden
% of fund 1.99%

^Absolute, percentages based on the difference between the total net assets of the two largest holdings of the fund.

Quarterly Data as of 30-Sep-2021

Top Purchase

Chevron
2.73%
Was (30-Jun-2021) 1.96%

Top Sale

Linde
2.41%
Was (30-Jun-2021) 3.01%

Quarterly Data as of 30-Sep-2021

30-Sep-2021 - Shinwoo Kim, Portfolio Manager ,

Our bearish long-term outlook for oil prices and our belief that we are in the middle of a secular downcycle for commodities have not changed. Despite the spike in oil price, oil productivity is still improving and has further room to run, pressuring the cost curve and leaving a challenged long-term outlook for energy stocks. As such, we remain meaningfully underweight energy to reflect our longer-term bearish view. The oil cost curve is influential in the cost curve of many other commodities and informs our bearish views on metals and mining, which remains a significant�underweight in the portfolio. Additionally, we continue to favor beneficiaries of commodity deflation (including utilities, packaging, and specialty chemicals) and expect to retain meaningful allocations to paper and forest products, where we see cyclical and secular tailwinds converging, as the cost curve steepens to the advantage of low-cost producers and the growing emphasis on environmental, social, and governance (ESG) factors adds additional support to the industry.

Specialty Chemicals

Raw materials for this industry have experienced meaningful inflation due to a sharp increase in oil and natural gas prices. Although this defensive industry remains one of the largest overweights in the portfolio, we trimmed several holdings within the segment during the period. Over the long term, our bearish outlook for commodities makes specialty chemicals an area of focus, thanks in part to the potential margin uplift that some companies may receive from lower input costs. In this space, we favor long-term earnings compounders that operate high-quality businesses, have the most levers to pull to offset weakness, and offer exposure to potential upside drivers that are independent of the macro environment.

  • We eliminated our position in intermediate chemical company Celanese and meaningfully trimmed Atotech, a supplier of process chemicals used in electroplating solutions for electronics and automotive technology applications. After a strong rally earlier in the year, high oil prices combined with intense supply and demand imbalances in key oil derivatives have resulted in raw material shortages and higher input prices for specialty chemicals companies. We have higher conviction in the strength of end markets for our coatings names and moderated our exposure to companies with less specialized end markets.
  • We increased our position in RPM International, which manufactures and sells coatings and sealants to consumer and industrial markets. We like RPM's risk/reward profile and leading coatings brands that it sells to niche end markets. Sherwin-Williams remains our largest specialty chemicals position. We consider it a best-in-class architectural coatings company and value its high free cash flow business that has historically generated solid returns on invested capital. In our view, the pricing increases implemented by RPM and Sherwin to help offset higher input costs are likely to set them up for durable margin improvement once the price of raw materials normalizes.

Integrated Oil and Gas

Several of our largest purchases during the period were additions to the integrated oil and gas industry, which has historically been a relative haven during energy bear markets because of the majors' scale, financial strength, and dividend yields. While we navigate the volatile market amid a shrinking universe of so-called safety plays in the oil and gas investment spectrum, we choose to remain focused on names with consistently good returns, a sustainable dividend, and a good balance sheet run by management teams that are very clear on creating value through capital allocation.

  • We added to Chevron, a company that boasts a strong balance sheet, has exhibited a commitment to returning capital to shareholders, and should be able to grow its hydrocarbon output in a cost-conscious manner.
  • France-based TotalEnergies is our largest holding within the segment, and we added to our position during the period. We like Total's high-quality management team, capital discipline, strong balance sheet, and credible plan to deliver solid production growth in the coming years. These qualities and an attractive dividend yield make TotalEnergies appealing in an environment where we expect the cost curve for oil to remain under pressure.
  • We also increased our position in Galp Energia. Overall, we believe that Galp offers a solid risk/reward opportunity and long-term growth potential as it ramps up production in Brazil and Mozambique. Further, in addition to its exploration and production activities, Galp has refining, retail, and wholesale operations and also operates extensive service stations in Portugal, Spain, and Africa, which gives the company less exposure to oil price volatility than other European integrated oil firms.

Construction, Farm Machinery, and Heavy Trucks

Companies in this cyclical industry posted impressive gains early in the year but were laggards in the second and third quarters due to concerns around peaking growth and a global resurgence of the coronavirus pandemic attributed to the delta variant, which has caused supply chain bottlenecks and dampened economic recovery expectations. We refined our holdings within the segment and are focused on high-quality names that we believe stand to benefit from an increase in mining-related spending and farm machinery companies that historically have captured a significant proportion of value during economic recoveries.

  • We exited Lindsay Corporation, which supplies irrigation and road infrastructure products and services, and eliminated turf, landscape, and irrigation equipment maker Toro in favor of higher conviction peers. We continue to maintain meaningful positions in construction equipment manufacturer Caterpillar and agriculture and construction equipment manufacturer Deere, both of which stand to benefit from additional infrastructure spending. We like their strong brands in their respective consolidated markets and their ability to collect rents on equipment, regardless of the economic cycle.

Railroads

We initiated positions in this industry, which stands to take share in transport due to cost inflation in the trucking industry. With their unique duopoly structure, rails maintain strong secular pricing power due to regulatory support and rational economic players, which limits industry supply growth well below demand growth. Further, ongoing efficiency improvements should drive margins above consensus. Rails are also beneficiaries of the green economy as they are fuel efficient and provide an environmentally friendly way to move freight.

  • We started new positions in Union Pacific and Norfolk Southern, freight railroad operators that service the Western side and Eastern side of the U.S., respectively. These companies' revenues are largely derived from shipping commodities, auto parts and finished vehicles, and intermodal containers. They operate in an industry with high barriers to entry and enjoy solid pricing power. We believe Union Pacific is a well-structured company, which stands to benefit from its precision scheduled railroading system, as well as its cost improvement and efficiency measures. In our view, Norfolk Southern could similarly improve its margin profile by effectively managing head count, fuel, and other discretionary operating expenses.

Multi-utilities

We appreciate utilities for their defensive qualities but remain selective and valuation-conscious, focusing on names that should be able to deliver solid cash flow and dividend growth during all economic cycles. In our view, the trends toward increasing adoption of renewable energy and electric vehicles, as well as the associated need for grid modernization, should be secular multi-decade tailwinds for the industry. For these reasons, we believe electric utilities should also benefit from increasing interest in investment strategies that involve ESG considerations.

  • We rotated out of DTE Energy and increased our stake in CMS Energy, a regulated utility that operates across electric and gas utility segments in Michigan. With thoughtful cost-cutting and robust capital investment, CMS is well-positioned for long-term growth in a favorable ESG environment. We also added to our holdings in Dominion Energy and WEC Energy based in Virginia and Wisconsin, respectively. These well-managed electric utilities trade at attractive valuations and have exposure to renewable energy initiatives that should contribute to future growth.

Sectors

Total
Sectors
9
Largest Sector Chemicals 16.86% Was (30-Sep-2021) 17.18%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2021

Indicative Benchmark: MSCI World Select Natural Resources Index

Largest Overweight

Other
By8.10%
Fund 10.61%
Indicative Benchmark 2.51%

Largest Underweight

Energy Services & Processors
By-15.71%
Fund 6.98%
Indicative Benchmark 22.69%

Monthly Data as of 31-Oct-2021

31-Oct-2021 - Shinwoo Kim, Portfolio Manager ,
We follow what the data tell us and remain focused where we believe we have an investment edge—specifically in the multiyear structural commodity call. The oil cost curve is influential in the cost curve of many other commodities. Therefore, in addition to our underweight energy allocation, we are also underweight metals and mining. We favour defensive industries, such as electric utilities, and beneficiaries of commodity deflation, including utilities, packaging, and specialty chemicals. We also see meaningful opportunities in the paper and forest products industry, which we believe could benefit from a steepening cost curve and a favourable environmental, social, and governance profile.

Countries

Total
Countries
21
Largest Country United States 55.30% Was (30-Sep-2021) 56.16%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2021

Indicative Benchmark: MSCI World Select Natural Resources Index

Largest Overweight

Sweden
By5.63%
Fund 6.76%
Indicative Benchmark 1.13%

Largest Underweight

Canada
By-8.30%
Fund 5.28%
Indicative Benchmark 13.58%

Monthly Data as of 31-Oct-2021

31-Jul-2015 - Shawn T. Driscoll, Portfolio Manager ,
From a country perspective, our allocation to Norway saw the largest percentage increase during the month of July. There were no notable reductions for the period.

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $1,000 $100 $100 5.00% 160 basis points 1.74%
Class I $2,500,000 $100,000 $0 0.00% 75 basis points 0.84%
Class Q $1,000 $100 $100 0.00% 75 basis points 0.92%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.