Global Natural Resources Strategy GOEHRING & Natural Resource - - PowerPoint PPT Presentation
M A R C H 2 0 1 9 Global Natural Resources Strategy GOEHRING & Natural Resource ROZENCWAJG Investors 3 Tie Case for Commodities Table of 7 Why G&R Contents 10 History 12 Philosophy 13 Investment Process 19 Portfolio
M A R C H 2 0 1 9
GOEHRING & ROZENCWAJG
Natural Resource Investors
FOR INSTITUTIONAL INVESTORS ONLY 2
Tie Case for Commodities Why G&R History Philosophy Investment Process Portfolio Guidelines Role in Portfolio Performance Positioning Current Market Views Our Research in Action Team Biographies Related Performance Contact Us 3 7 10 12 13 19 20 26 27 29 37 44 45 47
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Improving Fundamentals
Our models suggest that supply/demand fundamentals have improved while most investors remain historically underweight to the industry. Improving data will likely lead to a renewed interest in the sector with resulting inflows.
Valuation
Natural Resource markets have been in a five-year bear market and today we believe they ofger very attractive valuations. Historically, the strongest natural resource investment returns occur afuer long periods of market under-performance ever recorded.1
Low Correlation
Natural Resources tend to exhibit a low correlation with the broad market. The S&P Natural Resource Stock Index has a 0.59 correlation of monthly total returns with the S&P 500 Index since 1996.1
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CAGRPeriod GSCI S&P Relative 49%
62% 5% 13%
40% 2% 37%
19%
19% 0% 19%
7%
36%
40%
Average Defmationar y Period13%
to to
to
to to to
A B B C C D D E E F F G GGOLDMAN SACHS COMMODITY INDEX S&P 500 Ratio
W H Y N AT U R A L R E S O U R C E S ?
Compared to the S&P 500, the price of commodities has never been cheaper.
As of 6/30/18; Source: Bloomberg
A C E G B D F FOR INSTITUTIONAL INVESTORS ONLY 6 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% 19.0% 21.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ENERGY & MATERIAL WEIGHTING of the S&P 500
W H Y N AT U R A L R E S O U R C E S ?
The weight of Energy and Materials in the S&P 500 is at a 13-year low and is approaching the lowest reading ever recorded.
As of 12/31/18; Source: Bloomberg
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39 YEARS
Combined experience managing natural resource investments with extensive industry contacts
$8 BN
Raised for natural resource funds. $5 BN for a natural resource hedge fund, $3 BN for a mutual fund
91%
Versus Lipper peer group net of fees since inception (1/1/92)
T
Amongst Lipper peer group
We are value investors. We think the best time to fjnd value is when investor sentiment is bearish, price is depressed, equities are cheap, and our fundamental analysis tells us the S/D dynamics have changed.
RESEARCH-DRIVEN PROCESS
Our investment process is entirely driven by original research from which we derive our long-term commodity price assumptions, which
CONTRARIAN VALUE PHILOSOPHY
We are value investors. We strive to realize the highest level of capital appreciations by investing in global natural resource markets without incurring excessive risk.
FOCUS ON PERFORMANCE & FEES
We seek to deliver top quartile performance in our peer group
expenses and fees in the lowest quartile in our peer group.
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Leigh R. Goehring
2005 - 2015 1991 - 2005 1986 - 1991 1982 - 1985 1982
Launched/managed Chilton Global Natural Resources Fund Managed Jennison/Prudential Natural Resources Funds Managed Prudential-Bache Option Growth Fund Trust Department of the Bank of New York BA, Hamilton University, Economics and Mathematics
Adam A. Rozencwajg, CFA
2007 - 2015 2006 - 2007 2006
Worked exclusively for Chilton Global Natural Resources Fund Lehman Brothers, Investment Banking Division BA, Columbia University, Economics and Philosophy 27 YEARS OF NATURAL RESOURCE INVESTMENT MANAGEMENT 12 YEARS OF NATURAL RESOURCE INVESTMENT MANAGEMENT
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December 1991
Leigh Goehring starts managing Prudential Jennison Natural Resources Fund
March 2005
AUM of Prudential Jennison Natural Resources Fund reaches $3 billion
May 2005
Leigh joins Chilton Investment Company; managing Chilton Global Natural Resources Fund
December 2007
AUM of Chilton Global Natural Resources Fund reaches $5 billion
November 2007
Adam Rozencwajg joins Chilton; Chilton Global Natural Resources Fund
December 2015
Goehring & Rozencwajg Associates LLC is established
December 2016
Launch of Goehring & Rozencwajg Natural Resources Mutual Fund
January 2016
Launch of the Goehring & Rozencwajg Global Natural Resources Strategy
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A fundamental research firm focused exclusively on contrarian natural resource investments, with a team with over 30 years of dedicated resource experience. There are four pillars to our investment philosophy, values and approach:
RESEARCH FOCUSED PHILOSOPHY
If there is one thing that defines our Firm, it is our top-quality difgerentiated research focused on both the commodity level as well as the specific security level.
CONTRARIAN VALUE APPROACH
We believe the best way to find value in global commodity and natural resource markets is when prices are depressed, investors are discouraged, and financial measurements are cheap.
BEST IDEAS PORTFOLIO
We believe that portfolios
investors access to our best ideas while mitigating idiosyncratic risks and providing diversification. We are long term investors; target range for portfolio turnover is 20 - 25% per year.
FOCUS ON PERFORMANCE AND FEES
We seek to deliver top quartile performance in
3 – 5 year time horizon while simultaneously striving to keep our expenses and fees in the lowest quartile in
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Top-down COMMODITY ANALYSIS
Our research identifies situations where we believe the industry fundamentals have shifued, but the market has not yet noticed. Our investment approach tries to be contrarian in nature and we ofuen find
with periods of under-performance that we anticipate will be reversed as the commodity’s fundamentals become more widely accepted.
Bottom-up SECURITY ANALYSIS PORTFOLIO CONSTRUCTION RISK MANAGEMENT
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Top-down COMMODITY ANALYSIS
We begin with a top-down analysis of various commodity sectors. We utilize publicly available data when available, combined with proprietary databases to create an in-depth supply and demand model. We model the cost to bring on new supply, the unit economics of existing production, and trends in the underlying current production base in an attempt to understand supply dynamics. On the demand side, we attempt to model the relationship between regional considerations, macro factors, and consumer trends in an attempt to project demand under case-based scenarios.
Bottom-up SECURITY ANALYSIS PORTFOLIO CONSTRUCTION RISK MANAGEMENT
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We compute net asset values ("NAV") for the commodity producers we look at. Using our long-term commodity price forecast, we model current and future expected production profiles,
approximate a NAV. Our process is largely driven by extensive fundamental modeling of companies in our universe, extensive management meetings and whenever possible, site visits to the projects in question. We attempt to identify new profitable growth projects and compare them against other investments available in the industry.
Bottom-up SECURITY ANALYSIS Top-down COMMODITY ANALYSIS PORTFOLIO CONSTRUCTION RISK MANAGEMENT
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Bottom-up SECURITY ANALYSIS Top-down COMMODITY ANALYSIS PORTFOLIO CONSTRUCTION RISK MANAGEMENT
Our universe is primarily global equities. We invest across market capitalization & geography. A fully expressed theme in our portfolio typically represents approximately 20-30% with the exception
be weighted as much as 60%. At the security level, our portfolio is typically comprised of 50 – 70 of our “best ideas” across market cap and geography. We size our positions with an eye toward managing risk and reward; max position size is typically around 5%. We are long term investors; a target range for turnover is 20 – 25% per year.
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When a commodity market turns favorable, it is ofuen the poorest quality, most marginal and highly-levered companies that outperform. These investments also tend to carry the most
than expected to turn, or the capital markets undergo periods of adverse conditions, stocks can become distressed. Therefore, it is critical to balance expected future investment returns with security-specific
more heavily weighted towards higher-quality more stable-securities. Investments that ofger higher expected returns, but with a greater level
and are more diversified in the portfolio. We actively manage risk by continuously monitoring position size, sector and country weights, and balance sheet quality.
Bottom-up SECURITY ANALYSIS Top-down COMMODITY ANALYSIS PORTFOLIO CONSTRUCTION RISK MANAGEMENT
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INVESTABLE UNIVERSE
Global Equities
MARKET CAP RANGE
Invested across all market caps
# OF POSITIONS
50 - 70 of “best ideas”
POSITION SIZE
Max position size is typically around 5%
TARGET TURNOVER
20 - 25% per year
THEME EXPOSURE
A fully expressed theme in the portfolio would represent approximately 20-30%, with the exception of Energy which could be as high as 65%.
CASH EXPOSURE
0 - 10%
TARGET TURNOVER
20 - 25% per year
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G&R Global Natural Resources Fund
Currently, investors are utilizing the Strategy as both a return enhancer/alpha generator and also as a diversifier to their equity and real asset portfolios.
Diversifjer Return Enhancer
+ =
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R O L E I N P O RT F O L I O
Since inception, the Strategy has produced equity-like returns and high alpha generation.
ANNUALIZED RETURN as of 3/31/19 EQUITY RISK/REWARD(BETA/ALPHA) 1/1/92 - 3/31/19
G&R Global Natural Resources Strategy (net) Bloomberg Commodity TR S&P 500 TR
Annualized Returns (%) As of Date: 3/31/2019 Source Data: Total, Monthly Return Since Inception (1/1/92) 0.0 0.8 1.5 2.3 3.0 3.8 4.5 5.3 6.0 6.8 7.5 8.3 9.0 9.8 10.5 8.6 1.9 9.7 G&R (Net) Bloomberg Commodity TR S&P 500 TR Return Equity Risk (Beta) / Reward (Alpha) Time Period: 1/1/1992 to 3/31/2019 Source Data: Monthly Return Calculation Benchmark: S&P 500 TR USD Beta 0.0 0.2 0.4 0.6 0.8 1.0 1.2 FOR INSTITUTIONAL INVESTORS ONLY 22
R O L E I N P O RT F O L I O
Since inception, the Strategy has produced equity-like returns and high alpha generation.
PORTFOLIO CHARACTERISTICS 1/1/92 to 3/31/19
Portfolio Characteristics - Since Inception Time Period: 1/1/1992 to 3/31/2019 Source Data: Total, Monthly Return Calculation Benchmark: S&P 500 TR USDCumulative Return Cumulative Excess Return Annualized Return Alpha Sharpe Ratio Beta Correlation G&R (Net) Bloomberg Commodity TR S&P 500 TR 846.60
8.60 2.25 0.27 0.78 0.50 80.19
2.18
0.33 0.32 1,081.00 0.00 9.48 0.00 0.48 1.00 1.00
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R O L E I N P O RT F O L I O
The ability to capture equity risk premium and create value independent of commodity prices, in addition to not being impacted by the futures curve, make commodity equities an attractive complement to a commodity futures allocation.
Since inception, the Strategy has outperformed the commodity index by +600%.
EXCESS RETURN VS. COMMODITY INDEX 1/1/92 to 3/31/19
G&R Global Natural Resources Strategy (net) Bloomberg Commodity TR
Cumulative Excess Return (%) - vs. Bloomberg Commodity Index
Time Period: 1/1/1992 to 3/31/2019 Source Data: Total Return Calculation Benchmark: Bloomberg Commodity TR USD 1994 1999 2004 2009 2014 2019 FOR INSTITUTIONAL INVESTORS ONLY 24
R O L E I N P O RT F O L I O
The ability to capture equity risk premium and create value independent of commodity prices, in addition to not being impacted by the futures curve, make commodity equities an attractive complement to a commodity futures allocation.
EQUITY RISK/REWARD (BETA/ALPHA) 1/1/92 to 3/31/19
G&R Global Natural Resources Strategy (net) Bloomberg Commodity TR
Since inception, the Strategy has produced an annualized alpha of +7%.
Equity Risk (Beta) / Reward (Alpha) Time Period: 1/1/1992 to 3/31/2019 Source Data: Monthly Return Calculation Benchmark: Bloomberg Commodity TR USD Beta 0.0 0.2 0.4 0.6 0.8 1.0 1.2 FOR INSTITUTIONAL INVESTORS ONLY 25
R O L E I N P O RT F O L I O
For investors looking for a difgerentiated return profile relative to their traditional equity/bond portfolio or real asset portfolio, the G&R Global Natural Resources Strategy
1 2 3 4 5 6 7 8 9 10 11
1.00
0.59 1.00
0.63 0.86 1.00
1.00
0.72 0.53 0.63 -0.05 1.00
0.88 0.75 0.77 -0.11 0.76 1.00
0.36 0.66 0.61 0.27 0.29 0.47 1.00
0.34 0.55 0.47 0.22 0.36 0.40 0.56 1.00
0.63 0.66 0.65 0.04 0.57 0.74 0.45 0.50 1.00
0.16 0.00 0.14 0.78 0.18 0.14 0.21 0.27 0.15 1.00
0.13 0.11 0.08 -0.16 0.23 0.15 -0.11 0.02 0.14 -0.01 1.00
CORRELATION MATRIX 1/1/08 to 3/31/19
Low correlation to traditional equity, fjxed income, & real assets.
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G&R Global Natural Resources Strategy (Net) Bloomberg Commodity TR
YTD 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years Since Inception (1/1/92) G&R Global Natural Resources Strategy (Net)
13.26%
5.13%
1.06% 5.17% 9.28% 8.60%
S&P North American Natural Resources TR
16.21%
4.57%
5.31% 5.76% 6.00%
6.32%
2.22%
1.80% 2.18%
MSCI ACWI NR USD
12.18% 2.60% 10.67% 6.45% 11.98% 6.80%
Past performance does not guarantee future results. Please refer to disclosure information at the back of this presentation.
ANNUALIZED RETURN as of 3/31/19
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Oil & Gas Exploration & Production Oil & Gas Drilling Copper Fertilizers Other Energy Precious Metals Uranium Other CCJ 6.1% NTR 5.4% APY 5.3% MOS 4.8% U CN 4.5% ERO CN 4.4% PXD 4.3% RRC 3.9% KAP LI 3.6% RIG 3.3% United States Canada Great Britain Cayman Islands Kazakhstan Switzerland
S E CTO R B R E A K D O W N + CO U N T RY B R E A K D O W N + TO P 1 0 H O L D I N G S
As of 2/28/19, subject to change.
+ Excludes cash position of 2.7%29.4% 11.6% 15.3% 10.2% 6.9% 6.4% 14.1% 3.3% 44.4% 38.9% 5.9% 1.2% 3.6% 3.3%
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47.9% 39.1% 10.2%
O V E R A L L B R E A K D O W N + T H E M E B R E A K D O W N +
3% Other 29% Exploration/Prod. 7% Other Energy 12%
Drillers
10%
Fertilizers
6%
Precious Metals
15%
Copper Energy Mining Agriculture Energy Mining Agriculture Other
As of 2/28/19, subject to change.
+ Excludes cash position of 2.7%14%
Uranium
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50,000 100,000 150,000 200,000 250,000 1 2 / 1 2 / 1 4 2 / 1 2 / 1 5 4 / 1 2 / 1 5 6 / 1 2 / 1 5 8 / 1 2 / 1 5 1 / 1 2 / 1 5 1 2 / 1 2 / 1 5 2 / 1 2 / 1 6 4 / 1 2 / 1 6 6 / 1 2 / 1 6 8 / 1 2 / 1 6 1 / 1 2 / 1 6 1 2 / 1 2 / 1 6 2 / 1 2 / 1 7 4 / 1 2 / 1 7 6 / 1 2 / 1 7 8 / 1 2 / 1 7 1 / 1 2 / 1 7 1 2 / 1 2 / 1 7 2 / 1 2 / 1 8 4 / 1 2 / 1 8 6 / 1 2 / 1 8 8 / 1 2 / 1 8 1 / 1 2 / 1 8 1 2 / 1 2 / 1 8
(000 bbl)
U.S. CORE PETROLEUM INVENTORIES (relative to long-term average)
T H E M E : O I L
As of 12/31/18; Source: Energy Information Agency
FOR INSTITUTIONAL INVESTORS ONLY 31 85 87 89 91 93 95 97 99 101 103 105 7/1/09 10/1/09 1/1/10 4/1/10 7/1/10 10/1/10 1/1/11 4/1/11 7/1/11 10/1/11 1/1/12 4/1/12 7/1/12 10/1/12 1/1/13 4/1/13 7/1/13 10/1/13 1/1/14 4/1/14 7/1/14 10/1/14 1/1/15 4/1/15 7/1/15 10/1/15 1/1/16 4/1/16 7/1/16 10/1/16 1/1/17 4/1/17 7/1/17 10/1/17 1/1/18 4/1/18 7/1/18 10/1/18 IEA Global Demand Estimate (mm b/d)
IEA GLOBAL DEMAND REVISIONS 2010 - present
T H E M E : O I L
+400k b/d +1.0mm b/d +900k b/d +1.1mm b/d +800k b/d +1.7mm b/d
As of 12/31/18; Source: Energy Information Agency
+3.3mm b/d 2017 2016 2015 2014 2013 2012 2011 2010 2018
2019 +0k b/d
FOR INSTITUTIONAL INVESTORS ONLY 32 2 4 6 8 10 12 14 16 18 20 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000
SOUTH KOREA OIL INTENSITY
T H E M E : O I L
THE "S-CURVE" TIPPING POINT The “tipping-point” occurs when an economy reaches a certain level of real per-capita GDP and begins to consume more resources. Every additional unit of GDP per capita requires 3x more oil for countries in the “tipping-point” than for those that are not, in our opinion. China and India are both just entering their “tipping-point” according to our estimations.
Indonesia Today Thailand Today China Today Oil Demand (b/person/year) Source: BP Statisical Review, World Bank Real per capita GDP
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UNPRECEDENTED TIMES Never in history have so many people gone through the “S-Curve Tipping Point” simultane-
is set to surge over the coming decade. Our models indicate that while the last commodity bull-market was largely caused by problems with supply, this one will be driven by increased demand. 300% more people are going through the tipping point today vs. the past 40-year average. Approximately 60% of people on earth will be in the S-curve tipping point by 2025.1 POPULATION going through "Tipping Point"1
T H E M E : O I L
Source: World Bank, International Monetary Fund, Goehring & Rozencwajg Models
1"Population in tipping point" is an estimate number of people in the world living between $2000-10000 in real per capita GDP as measured by real USD from2000 at any moment in time. 500 1000 1500 2000 2500 3000 3500 4000 4500 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 People (in millions) in "Tipping Point"
FOR INSTITUTIONAL INVESTORS ONLY 34 50 100 150 200 250 300 350 400 $0 $5,000 $10,000 $15,000 $20,000 Total Installed Copper Base per Capita (kg per person) Real GDP per Capita
TOTAL COPPER INSTALLED BASE vs. real GDP
T H E M E : CO P P E R
Chart points represent an annual historical reading of Real GDP per Capita and Total Installed Copper Base for various countries. Total Installed Copper Base is calculated based upon Goehring & Rozencwajg models and is an attempt to measure the total amount of copper installed in a country, adjusted for depreciation.
INSTALLED VS. CONSUMED For commodities that are “consumed” (like oil), it makes sense to study consumption vs. real GDP. However, for commodities that have long useful lives, it is preferable to study the commodity’s total installed base. A commodity’s total installed base correlates extremely well with real GDP per capita, across many countries and over many decades. China will grow from consuming 50% of the world’s copper production today to over 70% by 20251 according to our models.
China Today
FOR INSTITUTIONAL INVESTORS ONLY 35 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% 30-Jan-20 30-Jan-24 30-Jan-28 30-Jan-32 30-Jan-36 30-Jan-40 30-Jan-44 30-Jan-48 30-Jan-52 30-Jan-56 30-Jan-60 30-Jan-64 30-Jan-68 30-Jan-72 30-Jan-76 30-Jan-80 30-Jan-84 30-Jan-88 30-Jan-92 30-Jan-96 30-Jan-00 30-Jan-04 30-Jan-08 30-Jan-12 30-Jan-16 US Treasury Gold Holdings as % of Monetary Base
Gold radically overvalued Gold radically undervalued
GOLD/MONETARY BASE RATIO KEY OBSERVATIONS While gold has certain unique properties (both good and bad), it is an asset like any other and cycles between periods of over-valuation and undervaluation. The value of US Treasury’s gold holdings has traded in a band between ~20 – 180% of the value of the monetary base. There have been two historical periods of extreme over-valuation: 1938 and 1979. Similarly there have been two historical periods
Gold has been an excellent investment afuer periods
periods of over-valuation, according to our models.
T H E M E : P R E C I O U S M E TA LS
Source: Bloomberg, St. Louis Federal Reserve
FOR INSTITUTIONAL INVESTORS ONLY 36 0.0x 10.0x 20.0x 30.0x 40.0x 1861 1873 1886 1898 1911 1923 1936 1948 1961 1973 1986 1998 2011
GOLD/OIL RATIO last 150 years The ratio is currently at a bullish level that investors rarely see during their lifetime. According to our models, oil is by far the most critical industrial commodity, while gold is the most important financial commodity. As a result, it stands to reason that the ratio of these two commodities can ofger many valuable insights. Historically our research has shown when oil is cheap relative to gold, oil and oil-related investments represent excellent investment opportunities. Over the last 150 years, a gold-to-oil ratio above 30 is exceptionally rare, occuring only when sentiment is incredibly negative and oil prices are extraordinarily depressed. In the post-World War II environment, every time this ratio surpasses 30 (or even 25), it has been a great opportunity to buy oil and oil related investments in our opinion.
As of 12/31/18; Source: Bloomberg, Energy Information Agency 0.00x 1861 1870 1879 1888 1897 1906 1915 1924 1933 1942 1951 1960 1970 1979 1988 1997 2006 2015 Gold-Oil Ratio (bbl/oz) 6 mon. MVA
Oil radically overvalued Oil radically undervalued
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PALLADIUM BOOST FROM EMISSIONS CUT
Barron's, 1/24/00
N O N - O P E C S U P P LY L E V E LS
Barron's, 2/9/04
DECLINING COPPER HEAD GRADES
Chilton Commentary, 10/18/05
DECREASE IN OIL SUPPLY
Market Commentary, 6/30/17
110 Wall Street ∙ New York, NY ∙ 10005 Natural Resource Market Commentary 2nd Quarter 2017 Introduction Chart 1: 100 Years of Commodity Valuation (1) Goldman Sachs Commodity Index to 1970. Goehring & Rozencwajg Commodity Index pre-1970. Source: Bloomberg, Goehring & Rozencwajg Models. We are at the bottom in global commodity prices. As you can see from Chart 1 (which plots the price of commodities as measured against the US stock market going back 100 years), commodities are as cheap today as they have ever been. Only in the depths of the Great Depression and at the end of the dying Bretton Woods Gold Exchange Standard did commodities reach this level of undervaluation relative to equities. For those investors willing to ignore the noise and extreme negative commentary (regarding surging shale production, OPEC disunity, electric cars, and China’s impending collapse), there is a proverbial fortune to be made if they invest today When commodities are this cheap relative to stocks, the returns accruing to commodity investors have been spectacular. For example, had an investor bought the Goldman Sachs Commodity Index (or something equivalent) in 1970, by 1974 he would have compounded his money at 50% per year. From 1970 to 1980 commodities compounded annually in price by 20%. If that same investor had bought commoditiesB U L L I S H O N G O L D
Forbes Magazine, 7/24/04
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$0 $200 $400 $600 $800 $1,000 $1,200 1/4/00 2/4/00 3/4/00 4/4/00 5/4/00 6/4/00 7/4/00 8/4/00 9/4/00 10/4/00 11/4/00 12/4/00 1/4/01 $/oz
Chart Title
PALLADIUM PRICE 1
" All that could give a big boost to palladium... It could produce the kind of parabolic rise associated with Internet stocks."
“All that could give a big boost to an
the bear market in recent years. We think tightened exhaust emission standards will make auto manufacturers much less price-sensitive to both palladium and platinum. Palladium usage in catalytic converters has increased tenfold over the last decade. A 100% increase in palladium prices would raise the price of an SUV by just $60.”
Past performance does not guarantee future results. Source: Barron’s, "Green Metal?", 1/24/2000
1Source: Bloomberg, 4/24/2018Article Published
FOR INSTITUTIONAL INVESTORS ONLY 40 100 200 300 400 500 600 700 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
GOLD PRICE vs. S&P 5001
“If all of the dollars in circulation ($560B) were backed with gold, the implied price would be about $2,500.”
“In making the case for gold, Goehring points to the relationship between the price of an ounce of gold and the level
Over most of this century, the Dow traded at eight times the price of gold. As recently as 1980, when gold spurted to $800 an ounce, the Dow and gold were at parity. I am a raging bull when it comes to gold... In times of infmation, people always end up gravitating to it.”
Past performance does not guarantee future results. Source: Forbes Magazine, "Gold for $2,500", 7/24/2000
1 Source: Bloomberg, 2/28/2017Article Published
Price Index (1/1/99 = 100)
FOR INSTITUTIONAL INVESTORS ONLY 41 $0 $40 $80 $120 $160 01/2004 10/2004 07/2005 04/2006 01/2007 11/2007 08/2008
WTI CRUDE OIL PRICE per barrel1
Past performance does not guarantee future results. Source: Barron's, "Pumped Up", 2/9/2004
1Source: Bloomberg, 12/31/2016Article Published
“We are looking at a major bull market, where we were in oil-service stocks [now] is where we were in tech stocks back in 1993 or 1994.”
“Tie biggest surprise could be oil,” [Goehring] says. He sees tight supplies pushing prices steadily upward -- bad news for motorists but terrifjc for certain types of oil companies. We’re just beginning to see a noticeable slowdown in non-OPEC supply of oil, which is bound to press more power into the hands of the oil cartel.
FOR INSTITUTIONAL INVESTORS ONLY 42 0.6% 0.7% 0.8% 0.9% 1.0% 1985 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Article Published
COPPER MINE HEAD GRADE global average2
“We completed a study of 115 copper mines throughout the world... Our analysis indicated that over the last fjve years there has been a drop in the head grade amounting to about a 1% decrease per year. Our conclusion is copper supply from new mines will be insuffjcient to close the structural gap between total supply and global demand.” Under that scenario, copper prices must remain high.
Past performance does not guarantee future results.
1 Source: Chilton Investment Company Commentary, 10/18/2005 2 Source: Bloomberg, 12/31/2016$1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 1/7/05 6/7/05 11/7/05 4/7/06 9/7/06 2/7/07 7/7/07 12/7/07 5/7/08
Chart Title COPPER PRICE per pound2
Article Published
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50,000 100,000 150,000 200,000 250,000 1/1/16 5/1/16 9/1/16 1/1/17 5/1/17 9/1/17 1/1/18 5/1/18
GOEHRING & ROZENCWAJG
Natural Resource InvestorsU.S. CORE PETROLEUM INVESTORIES vs. 5-year average
"Tie events that took place at the end
has […] cut production into an oil market that has already slipped into defjcit, just like they did in 2006. As recently as September, the IEA was writing about how “the supply-demand dynamic may not change signifjcantly in the coming months.” Our model tells us that inventories will approach 2008’s dangerously low levels by the end of 2018.”
“Tiis complacency in the market has lefu the world today in a very precarious situation (with very bullish implications).
Past performance does not guarantee future results.
1 Source: Energy Information Agency , Goehring & Rozencwajg ModelsArticle Published
US Core Inventory (000 bbl)
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Leigh R. Goehring
Leigh Goehring has 27 years of investment experience specializing in natural resource investments. From 2005 until late 2015, Mr. Goehring was the portfolio manager of Chilton Global Natural Resources Fund. This dedicated natural resources focused hedge fund grew to over $5b at its peak. Prior to joining Chilton, he managed the Prudential Jennision family of natural resources funds from 1991 to 2005, accumulating over $3B at their peak. Mr. Goehring began working on Wall Street in 1982 in the Trust Depart- ment of the Bank of New York. He holds a Bachelors of Arts degree with a major in Economics and a minor in Mathematics from Hamilton University.
Adam A. Rozencwajg, CFA
Adam Rozencwajg has 12 years of investment experience. From 2007 to 2015, Mr. Rozencwajg worked exclusively at Chilton Invest- ment Company on the Global Natural Resources Fund with Mr. Goehring. Prior to joining Chilton, he worked in the Investment Banking department at Lehman Brothers between 2006 and 2007. In 2005, Mr. Rozencwajg also worked with the MLG group at Neuberger Berman. Mr. Rozencwajg holds a Bachelor of Arts degree with a major in Economics and Philosophy from Columbia
Joseph Herlihy
Joseph Herlihy has nearly 41 years of diversified Financial Services experience, most recently serving as Managing Director and Chief Operating Ofgicer of Neuberger Berman’s Equities Division from 2003 to 2017. From 1984 to 2003, he served in a variety of positions at Neuberger, including Head of Operations, Head of NYSE Floor Operations, and Head of Regulatory Reporting. Prior to Neuberger, Mr. Herlihy worked at Becker Paribas, Prudential Bache Securities and the Dreyfus Corporation. Mr. Herlihy holds a Bachelor of Science degree with a major in Accounting from Siena College and is a Certified Public Accountant.
FOR INSTITUTIONAL INVESTORS ONLY 46 Calendar Year Fund Lipper IGE MSCI SPX 1992 3.69% 1.52%
7.62% 1993 30.68% 18.35%
10.08% 1994
1.32% 1995 26.54% 19.27%
37.58% 1996 28.16% 32.63%
22.96% 1997
0.99%
33.36% 1998
21.97% 28.58% 1999 45.15% 28.07% 27.23% 26.82% 21.04% 2000 29.08% 32.31% 15.79%
2001
2002 20.07% 3.48%
2003 37.10% 39.21% 34.40% 34.63% 28.68% 2004 27.06% 31.07% 24.59% 15.75% 10.88% 2005 48.41% 46.90% 36.61% 11.37% 4.91% 2006 17.63% 16.20% 16.85% 21.53% 15.79% 2007 30.56% 39.19% 34.44% 12.18% 5.49% 2008
2009 33.73% 47.89% 37.54% 35.41% 26.46% 2010 21.43% 14.14% 23.88% 13.21% 15.06% 2011
2.11% 2012
2.54% 2.20% 16.80% 16.00% 2013 6.82% 14.32% 16.49% 23.44% 32.39% 2014
4.71% 13.69% 2015
1.38% 2016 69.76% 22.48% 30.87% 8.48% 9.34%
From January 1st 1992 until May 31st 2005 represent Mr. Goehring’s performance at the Prudential / Jennison Natural Resources Fund and is total returns net of all fees incurred. Mr. Goehring stopped managing the Prudential / Jennison Natural Resources Fund on May 31st 2005 and began managing the Chilton Global Natural Resources Fund on August 1st 2005. During the interim period, the performance fjgures represent the Prudential / Jennison Natural Resources Fund even though Mr. Goehring was not the manager. Returns for the Chilton Global Natural Resources Fund are calculated on a total return basis net of all fees incurred and include all dividends and interest, accrued income, and realized and unrealized gains and losses. Returns for the Prudential/Jennison Natural Resources Fund were calculated using the standardized methodology prescribed for registered investment companies by the SEC. Performance from the Chilton Global Natural Resources Fund includes the (i) Chilton Global Natural Resources Partners, L.P., which was managed by Mr. Goehring between August 1, 2005 and December 31, 2015 and consisted of a long/short portfolio (the “Partners Fund”), and (ii) Chilton Global Natural Resources Long Opportunities, L.P., which was managed by Mr. Goehring between January 1, 2013 and December 31, 2015 and consisted of a long-only portfolio (the “Opportunities Fund”). Tie performance information presented below for the Chilton Composite refmects the returns of each Fund’s entire portfolio (including both long and short positions). Although the Fund may take short positions, it does not expect to do so to the same extent as the Partners Fund. Tie Fund believes that the return of the Partners Fund’s combined portfolio, on a cumulative basis,
Tie table also includes return information for the MSCI All Country World Index (ACWI), the Lipper Natural Resources Index, and the IGE. Tie MSCI ACWI is a free fmoat-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. Performance data shown for the MSCI ACWI is net of dividend tax withholding. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder. Tie Lipper Natural Resources Index is an unmanaged equally weighted index of the largest mutual funds in the Lipper Natural Resources category of funds. Tie IGE represents the performance of the IShares North American Natural Resources ETF, which tracks the S&P North American Natural Resources Sector Total Return Index. Index returns refmect the reinvestment of income dividends and capital gains, if any. Unlike the accounts described in the table, an index does not incur fees or expenses. Tie results presented in the table may not necessarily equate with the return experienced by any particular investor as a result of the timing of investments and redemptions. In addition, the efgect of taxes on any investor will depend on such person’s tax status, and the results have not been reduced to refmect any income tax that may have been payable. Tie related performance information is being provided for information purposes only and is not intended to predict or suggest the return that will be experienced by GRA’s clients. Tie performance of a client’s account may have been difgerent than the performance of the accounts shown in the table due to, among other things, difgerences in fees and expenses, invest- ment limitations, diversifjcation requirements, and tax restrictions. Past performance is not a guarantee of future results. Cumulative (1992-2016) Total 1096% 521% 187% 519% 875% CAGR 10.43% 7.42% 5.54% 7.41% 9.34% Chilton Prudential Jennison G&R
FOR INSTITUTIONAL INVESTORS ONLY 47
Goehring & Rozencwajg Associates
Tie information provided in this presentation is intended to provide the investor with an introduction to Goehring & Rozencwajg Associates, LLC. Nothing in this presentation should be construed as a solicitation, ofger, or recommendation to buy or sell any security or as an ofger to provide advisory services. Information in this presentation is intended only for United States citizens and
in making an investment or other decision. Investors should always obtain and read up-to-date investment services description before deciding whether to appoint an investment advisor. All investments are subject to risk, including the possible loss of the money you invest. You may owe taxes on any capital gains realized through trading or through your own redemption. For some investors, income may be subject to state and local taxes. Natural Resource investments may have difgerent characteristics and risk than do traditional investments, and can have more volatility than a more diversifjed portfolio.
Commodities Risk
Tie Firm concentrates its investments in the natural resources industry. Natural resources include, among other things, energy commodities such as oil, natural gas, coal and uranium, precious metals such as gold, silver, platinum, palladium and rhodium, diamond, base metals such as copper, lead and zinc; ferrous metals; agricultural commodities; and fertilizer commodities such as potash, phosphate and nitrogen. Historically, commodity investments have had a relatively high correlation with changes in infmation and a relatively low correlation to stock and bond returns. Commodity-related securities and other instruments provide exposure, which may include long and/or short exposure, to the investment returns of physical commodities that trade in commodities markets, without investing directly in physical commodities. Tie Firm’s accounts will be exposed to commodities through its investments in natural resources companies and its investments (such as derivatives and ETFs) which are intended to provide economic exposure to one or more commodities or commodities indexes. Tie Firm’s accounts may invest in commodity-related securities and other instruments, such as structured notes, swap agreements,
measurable economic variable dependent upon changes in the value of commodities or the commodities markets. However, investments in commodity related instruments do not generally provide a claim on the underlying commodity. Tie value
benchmark, changes in interest rates or factors afgecting a particular industry or commodity, such as droughts, fmoods, weather, livestock disease, embargoes, tarifgs and international economic, political and regulatory developments. Tie value
To the extent that the Firm’s accounts are more heavily exposed to a commodity sub-sector that undergoes a period of weakness, an investor can expect poor returns from the Firm’s accounts. Investments in commodity-related instruments may be subject to greater volatility than non-commodity-based investments. A highly liquid secondary market may not exist for certain commodity-related instruments, and there can be no assurance that one will develop. Commodity-related instruments are also subject to credit and interest rate risks that in general afgect the values of debt securities. Tie Fund may lose money on its commodity investments. Goldman Sachs Commodity Index (GSCI) is a composite index of commodity sector returns which represents a broadly diversi- fjed, unleveraged, long-only position in commodity futures.
FOR INSTITUTIONAL INVESTORS ONLY 48
PORTFOLIO MANAGEMENT
Goehring & Rozencwajg Associates 110 Wall St, New York, NY 10005 (646) 216-9777 | www.gorozen.com
SALES & MARKETING
Havener Capital Partners 1 Mill Street, 2nd Floor, Newport, RI 02840 (401) 314-0430 | www.havenercapital.com