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207. Bull, Bear & Beyond – Vantage: Ninety One – why geopolitics, electrification and AI are driving a commodities supercycle
0 Plays2 seconds ago
With geopolitics reshaping global markets and the AI infrastructure build-out accelerating demand for power and metals, natural resources are back in sharp focus. In this Vantage interview, Neil Shah speaks with Paul Gooden, co-portfolio manager of the Ninety One Global Natural Resources Fund, a $2bn strategy that is up 21% year to date and has delivered 53% over the past 12 months.
Paul explains why natural resources deserve a dedicated allocation in any portfolio, built around five core pillars: electrification, inflation protection, attractive valuations, diversification and performance. He shares how the fund has repositioned in 2026, rotating from its overweight in gold and copper into energy and fertilisers following the US-Israel strike on Iran in February. Paul also makes the case for why gold miners remain structurally attractive despite the recent pullback, and why the halo trade – investors seeking hard assets with low AI disruption risk – is a genuine and lasting regime change.
Watch the full interview to understand how Paul and his team are navigating commodity markets in one of the most complex macroeconomic environments in years.
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Transcript
Introduction to Paul Gooden and the Fund
00:00:06
Speaker
Welcome back to Vantage. We've been focusing on the Halo theme and geopolitics means that resources is a focus. Delighted to have Paul Gooden. Paul, ah could you introduce, first time on Vantage, maybe you could just introduce yourself, the fund you run, and then we'll get into the sector.
00:00:23
Speaker
Sure,
Fund Objectives and Recent Performance
00:00:24
Speaker
Neil, thank you for having me. So, Paul Gooden, I'm co-portfolio manager of the Global Natural Resources Fund a at 91 Asset Management. um I've been investing in this space for about 15 years and I used to work in the oil and gas industry.
00:00:37
Speaker
Paul, you you manage the 91 Global Natural Resources Fund along with George Heavely and David Heal. It's a $2 billion but the strategy. It's had a really good return over the last year, 53% over the last 12 months.
Investment Sectors and Strategy
00:00:50
Speaker
ah For investors haven't come across it, can you describe what the fund is trying to achieve and why you believe natural resources deserves a dedicated allocation in a sort of broader portfolio?
00:01:02
Speaker
Sure. So the Global Natural Resources Fund um aims to harness commodity price inflation through a portfolio of equities. So we invest across three main buckets, energy, metals and mining, and agriculture.
00:01:17
Speaker
And in terms of why a strategy like this deserves an allocation, it's really kind of driven by five pillars. So the first one is around electrification. So it's a big global megatrend. It's driving incremental demand for certain types of metals and incremental demand for power.
00:01:34
Speaker
Secondly, it's around inflation. So in periods of above trend inflation, few asset classes perform as well as natural resources equities. And the reason for that is the more you have sort of fiat currency chasing a fixed physical supply, so it kind of gets bid up.
00:01:52
Speaker
um Thirdly, it's around valuation. So, you know, our fund, the holdings typically have a free cash flow yield about double um the the broader global market. um And that free cash flow is generally getting returned to you, the shareholder, via dividends and buybacks because the companies are ah very very well disciplined.
00:02:12
Speaker
um Fourthly, it's around um kind of diversification. So this is a relatively undiversified strategy. um So that again, it's a relatively non correlated strategy versus many of the other kind of strategies folks will be investing in. And then finally, it's about performance.
Commodities Positioning and Company Stories
00:02:31
Speaker
So not just the outperformance of our fund versus our benchmark, which is MSCI Natural Resources, but also the outperformance of that benchmark versus the Bloomberg Commodities Index, which is the sort of highest profile index of the physical commodities. And there are various reasons I can get into about why that BCom Index doesn't tend to perform so well. Okay, so let's let's take a look at the performance, which is is it is pretty strong over last year. Your December quarter ah quarterly described 2025 as an exceptional year. So gold was up nearly 65%, silver up about 140%, copper hitting a record above $12,000 ton.
00:03:14
Speaker
ah Looking at your portfolio, how much of this performance actually came from reading those moves correctly versus simply being exposed to the right parts of the market at the right time? Yeah, so um our process is really around giving ourselves two ways to win. So firstly, we want to sort of get the commodities directionally right on a sort of a three, six, nine month view.
00:03:36
Speaker
But then we want something idiosyncratic in the company story that means that you we can generate alpha even if we haven't got the commodity call right. And you know if I can break down last year's performance between those two buckets,
00:03:50
Speaker
It pretty much fifty fifty um I think in a more normal year, it would probably be more weighted towards the idiosyncratic company-specific factors, but yeah, we we were trying it both right. Okay.
Impact of Geopolitical Events
00:04:01
Speaker
And one of the reasons I was very keen to have you in front of Vantage cameras was what happened on the 28th of February, which is yeah that you know the US s and Israel struck Iran. um geopolitics has sort of brought the sector into focus. Your January sort of commentary noted that you're deliberately underweight energy, worried about the sort of air pockets in oil price. Yeah. um What changes have you made to the portfolio since that that that sort of event, the bombing, and um how's the conflict um sort of getting you to think about sort of commodity prices?
00:04:37
Speaker
Sure, yeah. So a lot of the performance last year was driven by being overweight precious and overweight copper. And that was exactly the right positioning for last year. um And you're right, as we kind of entered this year, our base case was that the oil price would stay kind of relatively low into the midterm elections ah in November. Yeah. um Now, one thing to remember is that the job of a physical commodity price is there just to balance a physical market.
00:05:06
Speaker
it's not anticipatory and equities are more anticipatory. and And our view was that post the midterm elections, for various reasons, the oil market would be tightening.
00:05:17
Speaker
And so even though we were kind of relatively cautious on the oil price, because we had that more positive view into 27 and 28, we were adding energy in January and February. yeah So by the time the conflict actually kicked off, we were slightly overweight energy. um And as we sit today, we're kind of meaningfully overweight to energy. so I would say
Gold Strategy and Focus Shift
00:05:36
Speaker
the changes we've made in the fund near to date we've kind of reduced the copper and the gold overweight um and we've added to energy and and also to fertilizers because just as oil and gas are impacted by this, a lot of fertilizer comes through this as well.
00:05:51
Speaker
Okay. So, um, let's talk about the precious side. Um, gold was a big contributor to some last year's performance. It has performed. if If you look over the course of 12 months, it's performed exceptionally strongly. It's come off of late.
00:06:07
Speaker
um yeah Again, some of this was supported by sort of dollar weakness, geopolitical uncertainty, but also and the marginal cost effectively for these, theyre the gold producers, they are producing sort of exceptional margins at this price.
00:06:23
Speaker
um What's your view effectively in terms of your gold thesis? um I think Barrick is one of your sort of top five holdings. Is this still compelling ah for you? And at what what levels do you think that actually gold has really sort of reflected the that the scenarios that we're in today?
00:06:44
Speaker
Sure. So... Of course, you know, bear in mind, we invest in gold miners rather than gold the commodity, just to make that clear. So like on on gold, um i think a useful framework to think about is firstly, what are the thematic drivers?
00:06:57
Speaker
And then what is the kind of positioning in in gold? And so let's kind of take take take each in turn. So in terms of the thematic drivers, they're mostly still in place. And so what are they? They're firstly a weaker US dollar. And we think that we're in a dollar depreciating cycle for the next few years. So tick there.
00:07:17
Speaker
um Secondly, it's about geopolitical risk. And clearly be what's going on in the world, geopolitical risk is still a problem and who knows what what is going to happen next. yeah um Thirdly, it's about kind of the fiscal environment and governments around the world are still significantly outspending, which means government debt goes up.
00:07:39
Speaker
um You see that in in the US and and the UK in particular. And the only way for governments to kind of get themselves out of that debt problem is to kind of run the economy hot. And then the fourth one, and this is where you know has impacted the gold price in the last couple of months, is on the monetary side, because there was a view that you know you would see monetary easing in the US with a new Fed chairman arriving in the next few months.
00:08:03
Speaker
And with this kind of energy shock, there's now a sort of a concern that maybe the Fed won't cut. So thematically, you know i would say certainly three of the drivers are still in place. And look, we'll see what happens with the Fed. I mean, given AI and potential job losses from AI, yeah perhaps the Fed will look through any short-term kind of inflation issues.
00:08:23
Speaker
And then if you look at the kind of the positioning, if you look at a lot of gold is bought by central banks. And if you look at the sort of average central bank holding as a percentage of reserves, it's about 30%. And it's gone up, but it's about 30%.
00:08:37
Speaker
Back in the 80s, it was more than double that. So there's still room to go um on the central bank buying side of things. And then if you look at the retail side of things, if you look at volumetric positioning in ETFs, um it's still you know below where it was three or four years ago. So look, we are kind of structurally still bulls on gold, but kind of tactically, we are
AI's Influence on Investment Themes
00:09:00
Speaker
now underweight in the fund.
00:09:01
Speaker
um And that's You know, partly because we look across the whole natural resources space and we see kind of better risk rewarding in other areas like like energy and and fertilizers. Okay.
00:09:12
Speaker
You touched on AI in your last answer and ah you know along with the geopolitical shock, you do have another big theme running in AI. um And a big theme this year has been um you know this idea of long-term returns, let's find things that aren't impacted by ai So, ah you know, Halo or heavy assets, low obsolescence is a growing theme effectively. um And we're seeing allocation um being made to those kind of stocks.
00:09:46
Speaker
um Clearly this sort of plays into, you know, the areas that you're sort of focusing on. It's a natural home for for for sort of capital looking for the Halo trade. How do you think about it? um Do you think this is a sort of lasting regime change? and How aggressively do you sort of make the investment case around that?
00:10:05
Speaker
Yeah. So look, I mean, at the outset, I kind of outlined you know the five pillars why and this asset class deserves an allocation. And so you i could have mentioned as a sixth one, Halo, because you know clearly you know these are hard assets.
00:10:18
Speaker
um you know AI is not going to disrupt you know the the hard physical assets, the the producing oil wells and things like that. And in fact, if anything, you know, the drive for AI is is a tailwind because, you know, AI is very power hungry.
00:10:34
Speaker
um And, you know, a lot of that power is going to come from natural resources. So, look, I think it's i think it's helpful, um you know, in terms of how significant it's going to be. Look, don't know, but I think, you know it's certainly helpful rather than hurtful. Okay. And just a little follow on from that. I mean, it's not impacted valuations to the point that you think, oh, that looks very stretched because sometimes you see these sort of trends in the market and you suddenly think that actually everyone is rushing into this sector at at any price. You still think there's value in the sectors that you're looking at?
00:11:06
Speaker
Yeah, very much so. i mean, I mentioned earlier that the sort of the free cash flow yield of our average holding is about double um the broader market. So, know, valuations are doing it stretched.
Copper Market Challenges and Adaptation
00:11:16
Speaker
and And of course, ultimately, valuations are kind of driven by or pop partly driven by the commodity price. yeah And so a question we're asking ourselves is, know, what does the new normal look like post what's going on in Iran? And I think there are reasons to think that for some commodities, the mid-cycle price moves up, um which...
00:11:36
Speaker
It helps helps the medium-term valuation as well. hey Okay. The eat this the the trends that you sort of focus on as sort of, you know, megatrends, copper seems to sit right at the heart of many of these stories. um It's something that's important for electrification. It's important for AI data build-out.
00:11:55
Speaker
And now you've got potential supply disruption from the Middle East affecting sort of shipping routes. um I think you added Lundi mining to the portfolio in Q4, mainly for it a co copper exposure. You hold Glencore as a top position as well. um How tight do you think the copper market really is? um And how do you see that evolving over the sort of 12, 18 months? Sure. so So again, just to take a step back, um the very strong performance last year was driven by this overweight in precious and in the second half, particularly in it in copper.
00:12:31
Speaker
um And look, we we we remain kind of structurally constructive on copper because the long term volumetric demand drivers are are clearly there for all to see.
00:12:43
Speaker
um But we're we're actually underweight copper now. um And the reason for that is, A, the copper price moved up and copper actually is re-rated. But as we came into the year, um you know, the kind of apparent demand data from China was was pretty weak.
00:12:58
Speaker
um And yeah China consumed a lot of the the copper that's produced. and Chinese buyers are very kind of price sensitive. So we were seeing fairly negative apparent demand data out of China. um And with what we're seeing now in the Middle East, um that could potentially create more sort of, um you know, demand problems for for the copper market. So look, we liked it lot in the second half of last year.
00:13:21
Speaker
Now it'ss it's an underweight. And more broadly, that is the big advantage of having a active strategy in this fund. yeah You know, we... We're fundamental investors. So, you know, a lot of our work is bottom up company specific work, but we do you know work a lot on the commodities as well. And so i was very pleased to see, you know, the team this year.
00:13:43
Speaker
yeah We had our bets for last year. it worked very well. And,
Investment Philosophy: Humility and Rationality
00:13:46
Speaker
you know, in q one this year, we've made some quite meaningful changes, which, you know, hopefully will pay dividends for the rest of the year. Okay. one One of the things that struck me when I was sort of reading your fun literature and the fact sheets is that yeah're you're pretty ah honest about, you know, things that work and things that don't. And, you know, you're pretty candid about actually, you know, the things that did detract from the ah portfolio last year. So zero weight in BHP.
00:14:12
Speaker
um I think you had a sort of overweight and shell that didn't necessarily sort of work out. So, as as ah as a retail investor, you know what what i help I think what they would want to know is if a position goes against you or isn't working, how do you decide that that's a signal that the thesis is wrong or just noise that actually we just need to ride through? What's the thought process that that goes through?
00:14:42
Speaker
I mean, first thing, this is a ah personal view, okay? um Philosophically, i think any good investor with experience should be humble because you're going get stuff wrong. yeah And I think particularly in this space where there's lots of volatility but with the commodity, um i think I think you've got to be humble. And that means that you listen and you learn.
00:15:03
Speaker
um In terms of like when a position goes against you, we're kind of getting in there into sort of like the behavioral side of investing. Yeah. um And you know I think kind of stage one of that is just recognizing that you know it's okay to get things wrong. You just need to get more right than you get wrong. You want your wins to be big and your your your losses to so to be small. So the the first thing is like a behavioral acceptance that even the best investors get stuff wrong. So it's fine.
00:15:31
Speaker
Don't pretend to yourself it's not going against you. Accept the reality and approach it thereafter in a kind of a rational way. and Once you've kind of reached that kind of nirvana of accepting that occasionally stuff's going to go wrong, um what I think is quite useful is firstly, the cockroach theory in terms of, you know is is the problem that's caused the share price to go against you, is that a one-off? Yeah.
00:15:53
Speaker
or are there is there potential more problems behind that? yeah and And that's when kind of experience and domain expertise is very helpful. So often yeah for projects getting delayed or going over budget, you know often that's only the first cut. There can be additional problems as well. So try and kind of look at the problem and say, look, is is this the real problem in isolation or or is there a bigger problem?
00:16:17
Speaker
And then once you've done that, you know I think you just need to follow the maths. um you know Ask yourself candidly, um you know what what is my kind of risk-weighted outcome here? yeah um So yeah, try and try and be
Risks of Resource Investments in Recessions
00:16:31
Speaker
calm and and be rational. Okay. and And we've talked a lot about the sort of positive drivers effectively for the sector. So energy, and fertilizers, and know there's tightness in that market. I think there is a case for gold. um Higher inflation, weaker dollar contributing into into the sector.
00:16:50
Speaker
Um, it's always useful to think about the, what could go wrong side of things. So what's the other side of it? If you, if you had to articulate, you know, the bear case for resources in 2026, what do you think about and what does that look like? Yeah, so this strategy performs well in periods of above-trend inflation. I kind of mentioned that that that earlier as one of the pillars that kind of underpins this an allocation to this space.
00:17:17
Speaker
The strategy also works pretty well in periods of stagflation, yeah which you know is something that people are and increasingly concerned about. the environment it doesn't do so well in is if there's like an outright global recession. Because what that tends to do is it impacts demand, um the demand curve shifts to the left, um and and then commodity prices struggle and and the equities struggle. So it's really that kind of you know outright global recession, which which is a scenario which which would be problematic for the strategy.
00:17:47
Speaker
Okay, Paul, that
Future Insights and Discussions on Vantage
00:17:49
Speaker
has been a fascinating run through a whole range of commodities and in indeed sort of themes. um We're going to look forward to sort of seeing how you perform over the course the year. I do hope you come back for ah sitting in the vantage seat, maybe six months or 12 months ah down the line to report back on how the year's been. There's certainly no shortage of news flows. Good luck in in managing the bull failure the months ahead. Thank you very much for being on Vontage. Great, Neil. Thank you for having me.