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Alternative Market Briefing

Natural resources asset class hits a new record with 428 funds targeting $224bn as of October 2021

Monday, October 18, 2021

Laxman Pai, Opalesque Asia:

428 natural resources funds in the market are targeting $224bn as of October 2021-a new record for the asset class said a study.

"This is despite a dip in growth for both unrealized value, and dry powder which is now at $304bn," said the Q3 2021?€?Natural?€?Resources?€?Quarterly Report?€?published?€?by?€?Preqin.

However, the number of natural resources funds closed in Q3 2021 is at its lowest level in five years, at 22 funds closed. This is down 45% on the previous quarter where natural resources funds raised just under $19bn.

The report also found that natural resources funds produced a high one-year horizon internal rate of return (IRR) of 13.4% in the year to March 2021, amid gains in commodity markets, particularly in US oil prices, and concerns over rising inflation. Looking over a five-year horizon, this levels out to a respectable 6.2%, just behind real estate which has returns of 7.0%.

Meanwhile, the natural resources funds AUM hit a landmark $1tn as of March 2021, despite a dip in growth for both unrealized value and dry powder.

Natural resources funds' performance shows signs of recovery for the second consecutive quarter, converging with returns of other real assets. In the last few years, natural resources have offered portfolio diversification or inflation hedging to investors as performance consistently fell short of expectations.

Preqin data also showed an uptick in demand for emerging markets-focussed ......................

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