The Victory Global Natural Resources Fund is sub-advised by SailingStone Capital Partners LLC. The management team seeks to provide long-term capital appreciation, by investing in companies believed to have the ability to compound economic value for their shareholders. SailingStone conducts fundamental analysis focused on the following factors: supply cost curve of a given commodity, asset location along that curve to identify “advantaged assets,” inventory of future projects which provide the basis for future value creation management team quality to determine capital allocation discipline and history of value creation, and country risk. “Advantaged assets” are the low cost producers of a given commodity that SailingStone believes offer a competitive advantage in the form of achieving higher returns on capital relative to their cost of capital and the returns of other producers. The investment team uses a long term time horizon when evaluating investment opportunities, and the portfolio is intended to represent a broad array of commodities in a concentrated, high conviction strategy.
Philosophy & Process
Apply a Unique Analytical Lens. The investment team studies companies at the project level, using a long-term, private equity-like approach. The team believe that cumulative knowledge, established over years of site visits and analysis across numerous commodities, is the foundation of their long-term returns.
Exploit Market Inefficiencies. Although stocks and the underlying commodities are highly correlated over short periods of time, changes in commodity prices are difficult to predict. Rather than speculate on a source of returns related to changes in commodity prices, the investment team focuses on company-specific value creation, which the team believes to be a meaningful and less correlated source of returns over longer periods. The team seeks to take advantage of market volatility, establishing ownership positions in targeted companies when they believe the risk of capital impairment is low and when the expected future value creation is not reflected in the share price. The typical investment horizon is at least 3-5 years, reflecting the durable nature of portfolio companies' competitive advantages.
Invest Counter-Cyclically. The investment team believes the most attractive investment opportunities typically arise when the market is concerned about the short-term outlook for a commodity. In a highly volatile and deeply cyclical space, the team adheres to the value investing tenet "the time is right when the price is right." Thus, portfolio allocation and investment results will vary meaningfully from an index or the market. The objective is to generate superior long-term returns, which the team believes is best achieved by investing counter-cyclically.