With global monetary policy setting the stage for devalued currencies and a looming inflationary cycle, last year was apparently a good time for Frost Investment Advisors LLC to take its natural resources strategy to retail class investors.
The Frost Natural Resources Fund Ticker:(FNRFX), which was launched in Sept. 2011, has already grown to $53 million, despite the $8.6 billion asset management firm being mostly known for fixed income portfolios.
"We felt the market was entering a compelling period for out-performance in natural resources," said portfolio manager Ted Harper.
The fund is being featured by Frost at this week's Financial Planning Association conference in San Antonio.
Mr. Harper said he is noticing that the strategy is striking a chord with financial advisers on a number of levels.
"There are dollar-debasement concerns, and that bodes well for exposure to hard assets as a way to mitigate the negative effects of inflation," he said. "And the strategy is also resonating with advisers because they are starting to see the impact of natural resources business activity with new mining activity closer to home."
Mr. Harper said the longer-term case for natural resources is supported by an expanding middle class in many emerging and developing economies.
"We know there is a global scarcity of commodities and natural resources, and the growth of the middle class in many countries is contributing to that scarcity," he said.
The fund does not hold direct positions in commodities, but instead invests in the kinds of companies that mine, transport, refine and help with the general production and storage of natural resources.
This includes exposure to exploration and production companies, integrated oil companies, services and equipment companies, as well as precious metal mining companies.
The fund's three largest positions are Occidental Petroleum Corp. Ticker:(OXY), Apache Corp. Ticker:(APA), and Andadarko Petroleum Ticker:(APC).
The fund is up 7.7% over the past 12 months, which compares to a 13.5% gain over the same period by the natural resources fund category, as tracked by Morningstar