Economic uncertainty is rising but the shares of big oil companies have the defensive qualities to protect investors, according to a range of fund managers.
David Jane, who jointly manages about £880m across four multi-asset funds at Miton, said while the market is obsessed with many political events, the steady rise of the oil price has gone unnoticed by many investors.
He said that up until a few weeks ago he had shared the view of the wider market, that oil price growth would be muted.
But Mr Jane said: “It appears a new convergence of interests have emerged between Saudi Arabia and Russia, at least on the subject of the oil price, while shale capacity increases have not been as dramatic as might be expected, apparently for geological reasons.”
He said this changing political atmosphere means the oil price can perform well whatever happens to the wider economy, meaning investments in oil companies have a defensive quality.
James Dow, joint manager of the £578m Scottish American Investment Trust, run by Baillie Gifford in Edinburgh, said he typically does not invest in the shares of oil companies, as he regards the dividend potential of the sector as being unreliable.
But he has invested in the shares of oil company Total. He said that while many of the other global oil compaines focused on expensive acquisitions to grow their reserves of oil while cutting production, Total continued to invest in growing volume of oil, and this has led to the company being best placed to profit now that the oil price is rising.
He added that Total has proven itself to be a reliable as a source of dividends.
Martin Walker, who runs the £1.1bn Invesco Perpetual UK Growth fund, said he regards oil companies as a growth opportunity for investors as companies in the sector are much more prudent about how they spent their capital, and are more willing to “leave barells in the ground” if it is not economical to develop certain assets.
Jonathan Davis, who runs Jonathan Davis Wealth Management in Hertford, said “trends” are that the global economy will continue to perform well, and that would likely boost the oil price.
David.Thorpe@ft.com
