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fund profile
Strategy focuses on natural
resources and commodity sectors
The Van Eck Hard Assets 2X strategy seeks absolute returns through long/short
investments in natural resource equities and commodities.
Launched in 1996, Van Eck’s Hard
Assets hedge strategy focuses on
energy, metals and mining, paper
and forest products, agriculture and
other hard asset sectors. The portfolio
employs a long/short strategy,
using fundamental research to capitalise
on mis-pricing and valuation
discrepancies.
The strategy is available with
two different risk profiles. The base
strategy limits gross exposure
typically to 150% and has a 3%
portfolio stop loss. The strategy
generally maintains low net exposure,
and typically allocates 20% to
pairs trades, 60% in relative value
trades and 20% directional investments.
The majority of positions
are in equities with a minority in
futures. The 2X strategy can have a
gross exposure of up to 300% and
has a 6% portfolio stop loss.
Investment process
Investment ideas are generated from
various sources including company
analysis, commodity analysis, and
trade structure and evaluation. Portfolio
construction and risk management
tools are used throughout the
investment process.
Equity investments come from
a universe of 500 companies segmented
into specific hard assets
sectors. Equity positions are concentrated
in energy, metals and mining,
forest and paper products, and agriculture,
while futures investments
are focused on energy and metals.
The universe of companies is
screened for value with a focus on
companies trading on a net asset
value basis at a 25%–50% discount
to peers. Analysts pay particular
attention to recapitalisations,
restructuring, consolidation, new
resource discoveries, management
changes and other potential catalysts
that can unlock value.
Van Eck analysts use a wide
variety of sources and tools to
research and evaluate equity investment
opportunities. For example,
analysts conduct intensive fundamental
company research.
This includes company visits and
meeting with management.
These meetings are particularly
useful for evaluating current
and projected financials and for
inspecting operations. Van Eck
analysts often contact competitors
to learn their views of the prospect
company and its industry and are
able to develop a more complete picture
of the investment opportunity.
Van Eck analysts conduct assetbased
evaluations and earnings and
cash flow-based valuations. Assetbased
evaluations are particularly
important when examining oil and
gas producers, timber companies,
resource-based mining companies
and other asset-intensive resource
companies.
Some key considerations in these
evaluations include asset quality,
grade, location and accessibility, life
and potential growth of reserves, as
well as current and future production
costs, company hedging programmes,
balance sheet factors and
capital expenditure requirements.
28 | Access to Islamic Hedge Funds Supplement | November 2008 www.hedgefundsreview.com