Elstern Park Model Portfolio
The Resources Fund
Given what we believe to be the most likely development in the global macro-economic environment, we have planned below the general structure of the Elstern Park Resources allocation and how it applies as ‘best fit’ to the macro-economic overlay.
There are three primary target segments within the Resource Allocation element of the Elstern Park investment strategy. These seek to provide the greatest possible exposure to the proposed macro-economic overlays while providing a basis for strong performance in the event that our macro-thesis does not develop to the extent expected.
The Battery Minerals, EV & Electrification Case
These investments are focussed predominantly on primary battery minerals and resource investments centred around electrification of transportation, energy generation and distribution—and high ESG score industrial minerals.
Key mineral targets are Copper, Nickel and other related minerals such as HPA (High Purity Alumina) and SOP.
Precious Metals
These investments are heavily tied to the global macro-economic themes and in particular, the ongoing currency debasements, commodity underinvestment relative to historical norms, increasing demand and little-known legislative implications of global banking regulation changes.
Precious Metals allocations are specifically made in Gold and Silver assets, including global producers, explorers and royalty companies.
Rare Earths
These investments are focused on late-stage development and high-probability exploration resources, with defined assets and production income—supporting high-tech industry, clean energy and global government-mandated procurement.
Mineral targets include—but not limited to—magnet materials (NdFeB), rhenium, tantalum, gallium, among others.
Geopolitical developments and government mandate policy changes create significant opportunity within the Rare Earths space for properly aligned and managed assets.
Resources Fund vs ACWI ROI Since Inception
Three primary segments of focus
The Resources Strategy is focussed primarily on 3 primary segments within the broader resources space. These are indicated, in general terms, by the chart.
Holdings are limited—at the time of writing—to approx 12 holdings, domiciled in Australia, the US & Canada. With several holdings being investments with assets across a range of related segments, the ‘Diversified’ allocation provides further insight into the overall exposure provided to clients invested in this segment
See the full performance snapshot in our quarterly newsletter using the link below.
Elstern Park Resource Allocations by Country
Resources Strategy vs ACWI ROI — q4 2022
Resources Strategy vs ACWI ROI — Since Inception per quarter
Total ROI Since Inception
Resources Strategy
+22%
ACWI Benchmark
-16%
A critical element of the resource allocation review process is the geopolitical stability of the regions in which particular assets are held. Currently, the Elstern Park team will only consider investments in assets that are located within jurisdictions including; Australia, Canada, the US, Europe, and to a limited degree South America.
Expectedly, as commodities and resources become increasingly sought-after, a drift towards exploration and development opportunities in less well-governed—and terribly governed, for that matter—regions become pervasive. Aside from a strict initial 9-point evaluation process employed by the Elstern Park Resource Partners, covering mine and resource quality, management experience and pedigree and other infrastructure metrics, the issue of geopolitical risk of any asset remains at the fore.
We take a position that we would prefer to hold a great quality asset in a jurisdiction with ZERO chance of confiscation or ‘political interruption’, than a bonanza-grade resource that can readily be ‘commandeered’ by a host nation or its proxies.
There are many genuinely wonderful resources still yet to be capitalised upon, with many obtaining peer-reviewed and even JORC compliant status. However, the risk of a ‘midnight license raid’ by government cronies and shady bureaucrats is simply too large a risk to expose investors to.
Many of these more opaque jurisdictions are becoming increasingly well developed, thanks to foreign investment, primarily courtesy of China and its insatiable hunger for global resource assets.
Further, the ‘less stringent’ ESG conditions applied by many Chinese investors allows them to deliver greater returns from assets in regions where other investors, stymied by ESG limitations, simply cannot invest. This strange but understandable paradigm makes a careful selection of investments even more important and the geopolitical element more crucial and self-fulfilling than ever before.
The team at Elstern Park spends considerable time researching global geopolitical and economic developments relative to critical industrial and investment resources, as it does mathematical and actuarial considerations of particular assets or algorithmic strategies.
The ever-growing opposing forces of competing world superpowers continue to shape much of the resource investment landscape, perhaps more than most would care to admit. It is for this reason, albeit not exclusively, that Elstern Park resource allocations are limited to geographic locations that have an extremely high degree of political stability, commercial sensibility and legal accountability.
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