Why natural resource equities belong in your portfolio

Why natural resource equities belong in your portfolio

Why natural resource equities belong in your portfolio

9 minute read

February 2025

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The world is transitioning from an era of commodity abundance to one of scarcity. We believe this shift may result in significant returns for commodities and resource producers

Energy

Energy

Integrated oil & gas
Oil & gas exploration & prod.
Oil & gas refining & marketing
Oil & gas equipment & services

Metals & mining

Metals & mining

Diversified metals & mining
Gold
Steel
Aluminum

Agribusiness

Agribusiness

Fertilizers & agricultural chemicals
Construction & farm machinery
Packaged foods & meats
Agricultural products

The world is transitioning from an era of commodity abundance to one of scarcity

Valuations pose significant upside potential

Natural resource equities are trading near their cheapest levels in history versus global equities…

Price-to-cash flow valuation spread: Global natural resource equities vs. global equities
Price-to-cash flow valuation spread: Global natural resource equities vs. global equities

…which historically has led to outsized relative returns going forward.

5-year cumulative excess return (natural resources equities less global equities) vs. valuation spread

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Allocations can benefit portfolios

Natural resource equities have historically offered equity-like returns and performed well during periods of rising and unexpected inflation (when stocks and bonds have typically struggled).

Long-term total returns and average real returns during rising inflation (annualized)
Long-term total returns and average real returns during rising inflation (annualized)

Adding natural resource equities can help improve portfolio outcomes while providing greater

Impact of adding a 20% natural resource equity allocation to global equities

Specialists can create significant excess returns through sector and stock selection

Large stock and sector dispersion creates ample opportunities for active security selection.

Dispersion between top and bottom performing stocks (%) Large stock and sector
Dispersion between top and bottom performing stocks (%) Large stock and sector

FURTHER READING

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Attractive valuations, an advantageous macro environment and high private investor interest set the stage for potentially strong total returns from listed infrastructure.

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