British fund company Bakersteel Capital Managers was founded in 2001. Today, they are one of Europe's leading specialists in precious metals with their extensive experience in managing funds and investing in natural resources and gold.
We met up with managing Director Sven Kuhlbrodt to learn more about their investment strategy, the concept of "future metal" producers and why we should invest in gold and precious metals.
Hi Sven! Could you tell us a bit more about Bakersteel Electrum Fund, which focuses on identifying "future metal" producers. What does that mean?
The Bakersteel Electrum Fund is part of the same UCITS umbrella as the Bakersteel Precious Metals Fund. Both funds are managed by the award-winning commodity equity specialist Baker Steel Capital Managers. However, the focus of the Electrum Fund is somewhat different to the Precious Metals Fund. It concentrates on identifying so-called “future metal” producers. What we mean by that are:
a) specialty metals, such as lithium, nickel and copper which are needed for the renewable energy industry (e.g. solar power plants or wind energy installations), as well as the electric automotive sector, electrical grid extension and improvement and large-scale battery storage;
b) precious metals (and this is an overlap with the Precious Metals Fund) because we believe that not only does gold play a more important role in future technological applications, but will also safeguard against problems with fiat currencies (inflation, over-indebtedness). Last, but not least the fund invests about 10% (in the future more) in metal recycling companies.
The research process of both the Bakersteel Precious Metals Fund and the Bakersteel Electrum Fund are quite similar. Both processes involve a very detailed company analysis which besides looking at facts and figures also include interviews of management. In addition to that, with regards to the Electrum Fund, there is sector research as to what metals may do better than others in the future. All of that determines the decision-making when it comes to buying mining or recycling stocks.
Do you see any major global market trends connected to your investment areas? What does the future of metals and renewable energy look like?
Macro-economically we currently are faced with a number of challenges where an investment in gold and gold equities can effectively hedge against risks of other asset classes. Most of the developed and some of the less developed world are faced with either very low or negative real interest rates and typically also very high levels of debt on government, company and private household level. However, if in some areas of the world we see a recovery of wealth creation gold can also be an attractive allocation choice. As far as future metals are concerned, the EU und US green deals, as well as China’s commitment to renewable energy will give very significant impulses to the metal production/mining sector. For some metals we will experience 10 times of even higher levels of demand in the medium and long term.
Bakersteel Electrum Fund is one of your most popular funds. What are the primary critical success factors and why should we invest in gold and precious metals?
The Electrum Fund has been very successful since launch and also this year (30.54% as at 14/12/20; 37.3% above benchmark). We see this trend continuing for two reasons:
a) the commodity sector is a cyclical asset class and the progress the world has made with regards to Covid-vaccine development means that cyclical investments will most likely thrive next year and;
b) within natural resources equities the focus on metals need for renewable energy will likely perform even better due to most regions and countries providing significant fiscal measures to curb climate change.
As far as the Bakersteel Precious Metals Fund is concerned we believe that not only very low or negative real interest rates and high indebtedness will be with us for some time to come, but also that we might see higher inflation. Take that together with declining production (i.e. supply) you have the recipe for a higher gold price. On top of that gold producers are in good shape as far as cost control, deleveraging and quality of management is concerned. Their margins and dividend are at record highs.
In March, we saw a big decline due to Covid-19. How did Bakersteel handle the situation and how is Bakersteel positioned to handle such market dips?
We decreased or exited allocations of metal producers who had above-average Covid-risks (e.g. mine closures). Before we did that we sent questionnaires to all relevant existing or potential portfolio companies re. the Covid-plans. In many cases we interviewed management as well.
And finally - What are your top tips for SAVR's long-term investors?
We are of course a specialist in natural resources/commodities equities and metal recycling companies. We believe that any long-term portfolio should have some exposure to precious metals for risk hedging purposes. Also investors who are ESG-minded and want to profit from the move to a sustainable economy may consider to invest in a fund which gives them access to companies who are right at the beginning of the value chain which provides the benefits of the “Green Energy Revolution”.
Would you like to invest in the funds? Find out more:
Bakersteel Global Precious Metals A EUR
Bakersteel Global Precious Metals A2 EUR
Bakersteel Glb Fds SICAV - Elctm A Eur