The £107m Artemis Global Energy fund has struggled since its high-profile launch in April 2011, losing money in difficult markets for the energy sector in the autumn of 2011 and at the end of 2012.
The fund lost investors 1.5 per cent in the past 12 months, underperforming the MSCI ACWI/Energy index, which gained 1.2 per cent in the same period.
The Artemis co-founder said he and co-manager Richard Hulf had been wrong on Brazil in 2012 and vowed to review the portfolio’s weighting to the region, which underperformed in the past year.
Mr Dodd said: “What we have got wrong in the past year is Brazil so we are going to be revisiting that to see if we should increase our weightings there, so we can take advantage of any future rerating in Brazil, or whether we should just call it a day and completely come out of our positions there.”
Elsewhere, the manager said he hoped to benefit from the shale gas boom the US is currently experiencing.
The Global Energy fund has historically had an underweight exposure to the US compared with its peers; it currently has a 25 per cent exposure to the country, compared with the Investec Global Energy fund’s weighting of more than 50 per cent.
Mr Dodd said that because the fund’s rivals had substantial weightings in the US, he preferred to find value in less penetrated areas of the world, such as the west coast of Africa.
However, in December the fund established two positions in companies exposed to the US shale gas industry, Kodiak Oil & Gas and Magnum Hunter, as well as acquiring a stake in Cabot Oil & Gas. Mr Dodd said he expected the fund’s US weighting to increase in 2013.
The manager also entirely sold out of BP, the share price of which has yet to recover fully from the 2011 Gulf of Mexico oil spill disaster, and put the money raised by that sale into Rosneft.
Mr Dodd said: “The acquisition of BP’s Russian business TNK by Rosneft has created the world’s largest oil company and we’re very excited by it. Rosneft will have a premier position on the world stage.”
Meanwhile, Mr Dodd remained bullish on the outlook of global energy stocks and said he thought the fund was well positioned to capture the possibility of a rerating for the energy sector in 2013.
He said: “I think in an environment where you see a very robust oil price, with Brent crude set to stay above $100, and given the recovery in economies, especially the growth in emerging economies, there are opportunities to make considerable amounts of money in energy.
“This is where I think the greatest returns can be made for all shareholders.”
A conviction bet on energy companies
Much like any sector-specific fund, the Artemis Global Energy fund carries significant risks.
The long-term theme of energy investing is a sound one – the world population is ever growing and emerging markets are rapidly industrialising, creating greater demand for energy.
But the short-term outlook is mixed, with all energy funds experiencing high levels of volatility as the oil price fluctuates and political and economic issues hurt the sector.
Investors were initially bullish about the Artemis fund’s prospects, thanks in part to John Dodd’s (pictured) stellar track record, and the fund reached £100m within a year of launch.
It has barely grown since then as positive returns have proved hard to come by, though it has still attracted more inflows than its global energy competitors.
However, with the Artemis fund, Mr Dodd has attempted to strike a balance between large, well-managed energy giants, such as Rosneft, Exxon and Tullow Oil, with smaller companies with high potential upside.
Retail stockbroker The Share Centre seemed to agree with Mr Dodd’s assessment of the long-term theme, as it looked past the recent performance issues when it added the Artemis fund to its Platinum 120 at the start of 2013, but believers in the thematic story should be prepared for further volatility in the short term.
Key numbers
$112
The current price per barrel of Brent crude oil, down from its 2012 peak of $127 per barrel in March, but a 26 per cent rise from its low of $88 a barrel in June 2012.
39.3%
The proportion of John Dodd’s investment trust, Artemis Alpha, that is also invested in oil & gas stocks, though this weighting had been as high as 60 per cent in the past.
