New fund will take stakes in depressed oil stocks

Investment trust is pinning its hopes on a sustained re-rating in the commodities sector
Thursday 16 Feb 2017 Author: Tom Sieber

A new investment trust is being launched which will allow you to gain diversified exposure to the small cap oil and gas space.

Guinness Oil & Gas Exploration Trust is set to commence trading on the Main Market on 27 February. It hopes to raise between £30m and £100m.

The funds will be used to take advantage of an opportunity to invest in ‘depressed junior oil and gas equities’.

The expectation is that these shares will recover as larger companies return to invest in pre-cash flow projects, noting in the last two significant ‘up cycles’ the FTSE AIM Oil & Gas Index saw significant gains. In particular, the index increased by 250% between January 2001 and April 2006 and by 200% between February 2009 and January 2011.


POTENTIAL FOR 25% ANNUALISED RETURN CLAIMS ASSET MANAGER


A repeat of this kind of performance on a five-year horizon would result in a gross annualised return of around 25%, according to parent Guinness Asset Management.

The fund will be managed by two former energy sector analysts from M&G Investments, Stephen Williams and Sachin Oza. No dividends are planned as the emphasis is firmly on capital growth.

Total costs and expenses are guided not to exceed 2% of net asset value and there is a performance fee of 20% of the excess return above 8% a year.

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