The commodity carve-out

Global markets in 2022 have exhibited abnormal volatility. Inflation readings sit at multiples of central bank targets around the world, and a plethora of rate hiking cycles have begun in attempts to combat this. Muted capital expenditure during the pandemic has left supply chains in tatters, and producers scrambling to secure inputs. When compounded by an invasion involving two hegemonic commodity producers and a pilgrimage towards net-zero carbon emissions, we at Titan believed an environment for sustained commodity outperformance was firmly in place.

Indeed, the purpose of this blog is to highlight the strong outperformance year to date of our commodity carve-out as well as our commodity linked equities within the Acumen Portfolios and wider CIP. We wrote of a bullish setup for commodities in our quarterly perspectives in 2020.

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This was before the notion of a commodity super-cycle was being bandied about by some major investment houses, and we saw saw real opportunities for outperformance vs other asset classes. Thus, we have been overweight commodities since that point, crystalising strong profit in copper, silver, and most recently in commodity heavy Russian equities at the start of this year.

More recently, we have rotated into gold mining equities and global mining equities, whilst maintaining our exposure to physical gold and a broad-based commodity basket with an enhanced roll yield caveat. We have also enacted our bullish energy views through C-Corp US midstream energy companies, a position which has delivered exceptional yields and capital appreciation.

YTD price return in GBP can be seen below:

So far this year, all positions within the commodity carve-out have outperformed generic equity and bond indices. All have exhibited positive returns; notably our broad basket position commodity ETF, up 30.4% whilst the MSCI World is down around 4.5%. Our Gold miners ETF has returned 23.3% in the same period. This above performance is even stronger when compared against emerging market equities.

Looking forward, we see potential for further outperformance in specific commodities, especially when benchmarked against equities. Whilst valuations have risen across this space, we believe recent events have shed light on what is a structural imbalance in commodity markets. For a clean energy transition, we will need multiples of current demand for a new sub-sector of sustainable commodities.

Historically, commodities tend to perform well in the early stages of a rate hiking cycle; having returned an annualized 17.3% during the last 8 hiking cycles over 50 years. As this plays out across markets, defensiveness through precious metals, cyclical value exposure through the miners, and bets on decarbonisation should aid the portfolios in continued outperformance.

Portfolio Manager - Physicals
When not collecting various minerals and mining memorabilia, Jonah can be found managing the physical allocations at Titan Asset Management.

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Paul Hunt

CEO

Paul Hunt is a proven business leader and entrepreneur with over 30 years’ experience and track record of scaling businesses across multiple sectors. Hunt is highly experienced in business turnarounds, strategic planning and creating a positive people culture geared for success.

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David Chandler

Portfolio Assistant

David is responsible for providing operational support to the fund managers. David has passed the CFA UK IMC and graduated in 2018 with a degree in Economics and Business Management from the University of Sheffield.

James Peel, CFA

Portfolio Manager – ESG

James is a Portfolio Manager at Titan Asset Management and is responsible for Titan’s approach to sustainable investing. He previously worked as a researcher at the British Chamber of Commerce in Taipei. James graduated in 2018 from the University of St Andrews, where he studied economics. He is a CFA charter holder and has passed the CFA UK Investment Management Certificate (IMC), the CFA UK Certificate in ESG Investing, and the CFA UK Certificate in Climate and Investing (CCI).

Jonah Levy, CFA

Portfolio Manager – Physicals

When not collecting various minerals and mining memorabilia, Jonah can be found managing the physical allocations at Titan Asset Management. Prior to Titan he worked at Tavistock Wealth for 3 years, having previously gained experience in Holland at an oil brokerage, and in London at an energy trading house. Jonah is a CFA charter holder, having graduated from St. Andrews University with an MA in Management and Economics.

Alex Livingstone, CFA

Head of Trading – FX & ETFs

Alex is responsible for the ETF trading and FX strategy at Titan Asset Management and has executed over £5 billion of trades during his prior 4 years at Tavistock Wealth. Alex also assists in the wider portfolio management of the CIP specialising in technical analysis and risk management. He is a CFA charter holder and holds an BSc in Retailing, Marketing and Management from Loughborough University.

Sekar Indran, CFA

Senior Portfolio Manager – Equities

Sekar is responsible for managing the team’s equity investments. He helped expand the investment proposition over five years at Tavistock Wealth and continues this role at Titan Asset Management. Sekar has prior financial services experience at Barclays and Allianz. He is a CFA charter holder and holds a BSc degree in Industrial Economics from the University of Nottingham.

John Leiper, MSc, CFA, FDP, CFTe

Chief Investment Officer

John Leiper is the Chief Investment Officer of Titan Asset Management and carries direct responsibility for all investments in the Centralised Investment Proposition (CIP) at the firm. John has 15 years’ experience in financial markets having previously worked in a variety of roles at RBS, Morgan Stanley, Credit Suisse and Tavistock Wealth. John Leiper is a CFA and FDP charter holder and a member of the Society of Technical Analysts. He holds a BSc degree in Economics from Warwick University and an MSc degree in Economic History from the London School of Economics.

Matthew Cureton

Co-Founder

Matthew has been an intrinsic part of Haibun (now Titan Alternatives) since its formation. As a Co-Founder, he has focused on developing relationships with clients, providers, and companies seeking funding.

Matthew’s personal involvement with the fund-raising activities at Titan Alternatives starts at the very beginning of each journey.

Incorporating the due diligence process, meeting with the various management teams, and visiting companies on site, to then being involved with the marketing documents, hosting presentations, and facilitating the investments for clients. Matthew also continues to monitor and report on the investment throughout its life, which has included him taking on Non-Executive Directorships or observer roles on various company boards.