Investors with a medium to low risk profile should underweight resources in their Australian equity portfolio, and nobody should go overweight, according to a study from InvestorWeb Research.
The research, authored by consultant Angela Ashton, commissioned by anti-resources funds manager Opis Capital, and obtained exclusively by Money Management, flies in the face of market enthusiasm for miners and explorers.
The five best performers on the ASX 200 over the past 12 months have all been resource stocks, while the seven years from May 1998 to May 2005 saw the resource sector double the performance of the broader ASX 200, spurred on by talk of Chinaís industrialisation creating a resources super cycle.
However, InvestorWeb found that even during this sweet spot for the sector, the susceptibility of resource companies to movements in commodity prices and currencies created too much volatility, and meant they ìadded little or no value in a risk/return senseî.
InvestorWeb observed that moderating global growth, including a decelerating China, and likely rises in resources supply will probably dampen prices in the near future.
Many advisers share InvestorWebís concerns about the unpredictability of resources according to portfolio manager Robbie Frost at Opis Capital, which has built a $190 million book of retail business off of its defiantly anti-resources stance.
ìCommodity markets and currency prices are complex animals with a myriad of drivers, which are extremely difficult to predict with any degree of accuracy,î Frost said.
