Lowell Resources Funds Management Policies and Procedures Chapter
Document Number
INVESTMENT GUIDELINES
300-1
Section
Revised Date
Portfolio Management
31/12/2017
Subject
Page Number
LRF Securities Trading and Investment Process Policy
Page 1 of 11
Background The investment objectives of the Fund are to maximize absolute returns to Unitholders over the medium to long-term, along with annual distribution payment contingent on taxable profits generated over the term. LRFM operates through an Investment Committee which incorporates the experience and knowledge of individuals who have direct working experience in the minerals and energy industries, geosciences, broking, banking, and funds management. Markets in commodities and mining & energy company shares are dynamic and ever changing. Investment in the resource sector therefore requires active management. This is particularly true of thinly traded junior resource companies which dominate the Fund’s portfolio. These stocks tend to be sensitive to commodity price fluctuations and news releases, necessitating ongoing reassessment of an investment position. Strategy LRFM employs a top-down investment strategy, with an ultimate focus on optimising the stock selection process to achieve maximum performance. Commodity weighting is an important process, whereby bullish commodity sectors are identified and ranked, while the less promising sectors are downgraded. The Investment Manager then considers the individual stocks within those weighted commodity sectors, based on their fundamentals, chart patterns and pricing, and identifies entry positions and potential exit strategies for each stock. This requires a combination of economic and technical analysis, along with continued monitoring of investor sentiment. Risk management and preservation of capital is an important consideration. The Fund’s Portfolio will, out of necessity, be strongly biased towards the high-risk end of the spectrum, while avoiding the most speculative blue-sky exploration companies that lack an established resource base. LRFM has adopted a strategy of minimising downside risk through early identification and disposal of potential loss-makers, while maintaining or adding to winning positions. Increased cash holdings reduce portfolio volatility during uncertain times of impending market weakness. Depending on market conditions, the Portfolio usually comprises around 30-40 junior mining & energy companies that are actively exploring for, developing, and/or producing specific commodities (e.g. gold, oil, copper) and that have strong fundamentals and are expected to outperform, whilst maintaining a modest exposure to a more diverse range of minerals at lower points in the commodity price cycle.