Without a doubt, investing longer term in the energy sector
reflects a more prudent play. Investors wishing to take exposure for the long
term could invest directly in some of the oil majors, such as ExxonMobil and
British Petroleum (which have generated their own headlines lately by announcing
record profits). Such investments, however, require careful analysis of
individual company performance, estimates of likely future performance and, of
course, of concentrated risk in one of these corporations.
Probably the easiest way to take broad, long-term exposure is
through a fund, a number of which take managed exposure to companies operating
in the oil and gas industries. The ING Risk Managed Natural Resources Fund, for
one, seeks total return through a combination of current income, capital gains
and capital appreciation, according to ING. Under normal market conditions, the
fund seeks to achieve its objective by investing at least 80 percent of its
managed assets in the equity securities of, or derivatives linked to the equity
securities of, companies that are primarily engaged in owning or developing
energy, other natural resources and basic materials, or supplying goods and
services to such companies. A well-chosen manager could outperform the
underlying market against which he is benchmarked.
These managers have one ace in their pockets: Geopolitical
volatility will remain a constant for the foreseeable future. This day-to-day
volatility could, perversely, make long-term plays the most predictable of all.
Indeed, some market observers note that chronic political instability is leading
to underinvestment in production capabilities and, therefore, undersupply, which
creates opportunities. "Each country has a different story, but the common
feeling is that the investment climate is not very hospitable, and, as a result,
the multinational oil companies that have the expertise and the technology are
pretty reluctant to go into these places," says Gal Luft, director at the
Institute for the Analysis of Global Security in Washington, D.C.
John Ferry is an Edinburgh, Scotland–based financial journalist
and a senior correspondent for Worth.
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