Anglo American

Slower global growth and weaker-than-expected Chinese demand have fed into lower prices across most of the commodities basket. Our domestic equity and multi-asset portfolios cut their resources exposure meaningfully over the last two years as we exited PGMs and gold shares and took profits on the diversified miners. The long-term PGM outlook has deteriorated as electric vehicle adoption accelerates and local producers battle rising production costs. The underweight position in PGMs has benefited the Fund, which continues to have no exposure to pure-play PGM producers. We don’t believe the ratings of the SA gold shares offer a sufficient margin of safety for the short-life, high-cost nature of their assets and have no exposure to gold miners as a result. This benefited the Fund over the quarter but remains a detractor YTD. We remain constructive on energy markets where we expect tightness in the medium term as demand remains robust during the transition to lower carbon energy sources, and the lack of investment in new capacity over the last few years constrains supply. We have diversified our energy holdings across a global basket of names to reduce company-specific risk. Additional resource holdings include Mondi, Glencore and Anglo American. The diversified miners offer attractive free cash flow streams, even at more normal commodity prices, and we maintain a holding.