I enjoy investing in real things
In spite of 2012 not being a particularly good year for gold and oil, Angelos Damaskos, chief executive and investment adviser at commodity specialist Sector Investment Management, remains confident that this is still just the start of a supercycle in commodity investing that will last for the next two decades.
Some investors – particularly those with less of a direct interest in commodities – have repeatedly questioned whether the resources boom can continue, if only on the basis that, since 2001, it has already had such a good run. With oil and gold hitting new highs in various currencies in the past two years, however, Mr Damaskos’s long-term judgment has so far proved astute. As he points out, he remains far from alone in his assessment.
“I read a book about this supercycle idea and he [the author] believed in it so much that he travelled the world with an emphasis on commodity countries – China, Russia, South Africa – to see what was going on in those countries and what I read was illuminating and clear.
“One of the main reasons I became involved in this business was the belief that this commodity supercycle would last for 20-30 years. We draw parallels with what happened in the industrial revolution in the US, for example. Yes, both times are different – what China is going through now is different and India as well – but we have to look beyond that.”
One of the core aspects of Mr Damaskos’s thesis is emerging markets. He argues that since the early 1990s the developing world has consumed an increasing quantity of commodities to bring its standards of living closer to those in the West. With the slowdown in emerging markets at the moment, some investors argue this theory is tired. But Mr Damaskos says it has a lot further to run.
“They are building factories, roads, railways, motorways, treatment plants and behind all of this industrial activity are commodities – cement, oil, fuel, aluminium, steel,” he explains.
“If you compare some metrics, the US at the turn of century consumed four to five barrels of oil per capita and now are consuming roughly 24. China was consuming approximately two or three in 1992-93 and it is now roughly six barrels per capita. There is a huge leap to fill this gap between the consumption of energy and the resources available.”
Born and raised in Greece, Mr Damaskos moved to the UK when he was 17 to study mechanical engineering at the University of Glasgow, only returning to his homeland to carry out the statutory two years of national service in the navy.
Returning to the UK to do a masters degree in business administration, Mr Damaskos received three offers to join firms in the City, opting for a role at a small privately owned German investment bank that specialised in natural resources in emerging economies.
“I had three offers to join the City and I chose the offer by the German bank because I thought it would be more exciting to be involved with the emerging markets and with those markets these are driven by commodities,” Mr Damaskos explains. “That is how I was drawn into commodities investment over the years. I enjoy investing in real things, investing in productive assets where I can extract value from the rock or the seabed and sell them to the market.”