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Alternative Market Briefing

AUM for the natural resources industry surpasses $750bn, and continue to grow in 2020

Thursday, March 12, 2020

Laxman Pai, Opalesque Asia:

AUM for the natural resources industry has surpassed $750bn and looks set to continue growing during 2020, said a study.

Of that, natural resources and timberland funds accounted for $230bn, up from $81bn at the end of 2009, according to the Preqin report 'Investor Outlook Alternative Assets H1 2020.

Alongside this growth, the industry is also diversifying, with investors embracing new sectors beyond conventional energy funds.

Agriculture funds raised over 100% more capital in 2019 compared with 2018, hitting $3.6bn. Renewable energy funds made up 68% of all energy-focused funds closed in 2019, their largest proportion yet.

Despite poor performance, industry is expanding

Although the industry is expanding in more ways than one, natural resources funds are performing poorly. The horizon net IRR in the year to June 2019 was 1.5%, the lowest of any private capital asset class.

Natural resources funds distributed just $53bn to investors in H1 2019, and funds with a primary infrastructure focus were responsible for a large proportion of this. That said, only 26% of natural resources investors allocate to the asset class in search of high absolute returns.

Especially considering the prospect of an imminent market correction, investors continue to rely on natural resources for portfolio diversification and low correlation to other asset classes.

"Indeed, the majority (71%) of surveyed investors feel performan......................

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