Gold rush for resources funds
So far this year, natural-resources stock funds have returned nearly 34 percent, topping all domestic stock-fund categories, according to Morningstar. Investors have taken notice. These funds attracted $699.2 million during the third quarter. They had nearly $72 billion in assets as of Sept. 30.
Such funds, which focus on gold, oil and other commodities, have benefited from soaring prices amid demand from China, India and other developing nations. The weak dollar is also boosting prices of commodities, some of which are seen as a currency hedge.
Dean Junkans, chief investment officer for Wells Fargo’s private bank, suggests investors keep 5 percent of portfolios in commodities. “Commodities are great in that they zig when stocks zag,” he says.
Shares of natural-resource producers, though, are more correlated with general stock prices than commodity prices. For more direct exposure, investors can look to exchange-traded funds (ETFs). While Junkans says many ETFs are heavy in certain commodity sectors, such as energy or metals, the Rogers International Commodity index includes everything from live cattle to lumber to greasy wool. A vehicle based on it, Elements Rogers Total Return index, (RJI) was launched Oct. 19.
Analysts, though, warn that natural-resources funds and commodity prices have had a tremendous run, and a correction may be in the offing. With crude prices running close to $100 per barrel, Oppenheimer analyst Fadel Gheit says oil is about $40 above the price it should be, based on fundamentals. What’s more, Morningstar says the natural-resources-fund category is among the riskiest.