Across the natural resources value chain.
Recurrent's Natural Resources Strategy invests across producers, infrastructure, processors and resource-intensive consumers. The objective is not to depend on a single commodity-price call. It is to find where market expectations offer the most attractive full-cycle return opportunity.
Available through separately managed accounts for U.S. investors and through the Alma Recurrent Global Natural Resources Fund for non-U.S. investors.
Natural resources are not one trade.
Commodity cycles create very different economics across the value chain. Producers may benefit from rising prices while refiners, chemicals companies or other commodity consumers face higher input costs. Supply constraints in one part of the system can create opportunity somewhere else.
A broad mandate allows us to compare those opportunities rather than remain permanently anchored to one industry or one direction for commodity prices.
Produce
Exploration and production, metals and mining, agriculture and forest products.
Move & service
Midstream infrastructure, equipment and companies providing services to resource industries.
Process
Refining, chemicals, metals processing and other businesses converting raw materials into higher-value products.
Consume
Industrials and other businesses for which energy and natural resources are meaningful operating inputs.
Commodity price is an output, not an input.
Rather than begin with a forecast for oil, gas, copper or another commodity, we begin with company economics and valuation. The prices investors assign to resource businesses already embed expectations about future returns and commodity conditions.
Every valuation contains a set of expectations.
Our job is to understand those expectations, compare them across the natural resources universe and identify where the implied future looks most attractive relative to the price.
Start with business economics
We study historical and prospective returns on invested capital, the capital required to sustain the business and the durability of those returns across a cycle.
Compare returns with valuation
EV/IC and other valuation measures help us determine what level of future company returns the market appears to be pricing in.
Compare implied expectations across sectors
Producers, processors, service companies and consumers can imply very different commodity and return environments at the same time. Those differences help direct portfolio exposure.
A broad universe, narrowed by valuation.
Fundamental work progressively reduces an opportunity set of roughly 1,000 public companies to a concentrated, actively managed portfolio.
Companies across natural resources, energy and resource-intensive industries.
Candidates receiving deeper valuation work, fundamental analysis and scenario analysis.
Companies selected on the basis of fundamental upside, downside and relative opportunity.
Portfolio decisions are comparative, not just absolute.
We develop upside, base and downside cases and rank companies according to their opportunity relative to risk. The portfolio is formally reviewed in weekly investment meetings as valuations, company fundamentals and market expectations change.
Full-cycle returns help us see through the cycle.
Commodity-driven earnings can make traditional valuation multiples look cheapest when earnings are near a cyclical peak and most expensive when earnings are near a trough. We use enterprise value relative to invested capital as an important counterweight to that pro-cyclicality.
Earnings move with the commodity.
P/E, EV/EBITDA and cash-flow multiples can change dramatically as spot commodity prices move, sometimes obscuring the full-cycle economics of the underlying business.
Returns anchor the valuation.
Comparing enterprise value with invested capital, together with the company's historical and prospective returns on that capital, helps us assess what long-term economics are embedded in the stock price.
Flexible mandate. Consistent discipline.
Different commodity environments create different opportunities. The Natural Resources Strategy is designed to move across them while applying the same valuation-driven process.