The natural resources sector includes companies engaged in extraction of commodities such as coal, metallic ore, sand, gravel, and oil shale. It may also include logging and drilling for oil and gas.
Natural resource investing has long been staple in strategic asset allocation. Natural resources act as store of value, especially during times of rising inflation or currency depreciation. Nevertheless, the industry carries risk such as adverse economic, political, and regulatory developments. Due to these potential pitfalls, investing in natural resources only makes sense as part of a well-balanced portfolio. One way to access this industry is through mutual funds. We review five below.
Fidelity Select Chemicals Portfolio
The Fidelity Select Chemicals Portfolio (FSCHX) is a mutual fund that seeks capital appreciation in companies engaged in the research, development, manufacture, or marketing of products and services directly related to chemicals. The fund was founded in 1985 and has been managed by David S. Wagner since August 2019.
As of end February 2021, the fund had $700 million in assets. Its one-year return was 41.65%, compared with 31.29% for the S&P 500 Index and 41.88% for the MSCI U.S. IM Chemicals 25/50 Index. The fund has an expense ratio of 0.78%, though investors are not hit 12b-1 fees, and no minimum investment is required.
Allianz Global Water Fund
The Allianz Global Water Fund invests in companies engaged primarily in the business of water resource management or improving the supply, efficiency, or quality of water. Allianz launched the fund in August 2018 and it has been managed by Andreas Fruschki since that time.
As of end March 2021, the fund had about €495 million in assets. Its one-year return was 41.65%, compared with 56.59% for its benchmark, the MSCI ACWI Index (Total Return Net in USD). The Allianz Global Water Fund charges a front-end load of 5% and an "all in fee" of 2.05% per year.
Icon Natural Resources and Infrastructure Fund
The ICON Natural Resources and Infrastructure Fund invests in companies in the energy, industrials, materials, and utilities sectors. Fund managers use a quantitative methodology to identify companies they believe are underpriced relative to their value.
ICON founded the fund in 1997. As of end December 2020, the ICON Natural Resources and Infrastructure Fund had about $118.6 million in assets. Its one-year return was 5.53%, compared with 17.92% for the S&P 1500. It had a 1.29% net expense ratio.
BNY Mellon Natural Resources Fund
The BNY Mellon Natural Resources Fund is focused on long-term capital appreciation and invests in foreign companies. At least 75% of the fund's assets are invested in countries that make up the MSCI EAFE Index. Its biggest holdings are in the oil gas and consumable fuels sector, followed by metals and mining, and chemicals. The fund was founded in 2003.
As of end March 2021, the BNY Mellon Natural Resources Fund had $396.5 million in assets. The fund returned 6.28% in 2020, compared with 18.4% for the S&P 500. Total expenses came in at 1.26%. There is a 5.75% sales charge for investments of $50,000 or less.
T. Rowe Price New Era Fund
The T. Rowe Price New Era Fund invests at least two-thirds of its assets in natural resource companies that stand to benefit from rising inflation. It favors companies that can operate profitably when both labor costs and prices are rising. The fund was founded in 1969, making it one of the oldest funds to focus on natural resources. Shawn Driscoll has been its portfolio manager since 2013.
As of end February 2021, the New Era Fund had $2.9 billion in assets. The fund lost 2.67% in 2020, which was better than the 12.26% loss registered by its benchmark, the MSCI World Select Natural Resources Index. Net fees for investor class shares are 0.69% with a minimum investment of $2,500.