Towards the end of last year, Terra Capital repositioned the fund’s holdings to capture opportunities in lithium, which is used in batteries and heat-resistant ceramics, cobalt, also used in the production of batteries.

The Terra Capital Natural Resources Fund invests in global listed small to mid-sized mining and energy companies.

Jeremy Bond, founder and chief investment officer of Terra Capital, says: “We are now sitting with what we think present the best opportunities for significant capital growth over the next six to 12 months.”

The fund produced a one-month return of 8.01 per cent in January, compared with a 2.94 per cent return for the S&P/ASX Small Resources Index over the same period. This follows a return of 50.17 per cent for the fund in the 12 months to the end of December.

“Our portfolio breakdown in terms of commodities is leveraged to the parts of the commodity complex that have performed well and we think will continue to perform well,” Bond says.

“Lithium and cobalt continue to perform well and our positions in gold are now delivering good performance.”

January was a strong month in commodity markets. Bulk metals added to recent gains, with iron ore reaching its highest level since 2014, finishing the month at $83.50 a tonne. Crude oil prices were firm.

Precious metals were strong, with platinum and palladium both rising nine per cent in the month, followed by silver (up six per cent) and gold (up three per cent).

In the industrial metals market, the price of copper rose 5.2 per cent and aluminium 5.4 per cent. The nickel price fell 3.4 per cent.

“This month’s result is in some ways validation of what we have been saying for some months. The market’s rotation away from defensive businesses over the past six months has continued and has gathered pace,” Bond says.

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Terra Capital founder and chief investment officer Jeremy Bond said the results “were a vindication of the firm’s bottom-up value investing approach based on identifying opportunities in the smaller, often under-researched companies and fledgling, high potential businesses in the IPO and pre-IPO market.”

He noted that this approach included a portfolio of companies in both the funds where returns are not necessarily correlated to financial market performance.

The flagship Terra Capital Natural Resources Fund, launched in 2010, is designed for investors seeking exposure to small to mid-sized global mining and energy companies and has outperformed all benchmarks since inception, delivering a cumulative total return of 244.88% since inception and an annual average return of 20.96%pa.

“The four largest commodity exposures in the current portfolio are lithium, gold, cobalt and coal, with lithium and cobalt reflecting our continued exposure to the electric vehicle and energy storage thematic.

“Key performers in 2016 were Galaxy Resources (ASX:GXY), General Mining (ASX:GMM) and NexGen Energy Limited (TSX:NXE),” Mr. Bond said.

The Terra Capital New Horizons fund was launched in January 2016 with the aim of providing superior absolute returns through investing in small and emerging companies.

Mr. Bond noted “This fund currently comprises an eclectic mix of businesses ranging from a vegetable seed intellectual property company, Abundant Produce Limited (ASX:ABT); a real estate technology company Updater Inc. (ASX:UPD); a water technology company Emefcy Group Limited (ASX:EMC) and a tech based industrial company operating in specialized and high performance microprocessor manufacturing sector, Sensera Limited (ASX:SE1).

“As small cap, high conviction investors, we build a concentrated portfolio of stocks that satisfy our investment criteria. Terra Capital’s view is not that investors should avoid major companies but that there are excellent opportunities beyond the large caps,” he noted.

“We follow an exhaustive schedule of company meetings to identify and analyse opportunities, typically meeting with more than twenty companies a week, and have a deep network of professional contacts in the emerging companies field.

“In terms of the New Horizons Fund it pays to look for companies that offer significant technological or business model innovation. However it’s important to note that innovation is not just limited to science or information technology companies, but can exist across varied sectors, industries and regions.

“On the macro level we are optimistic about the market outlooks with the Trump factor likely to sustain market progress and drive economic growth and reflation.

“At the portfolio level we are confident that our holdings are positioned to gain further momentum in this environment,” Mr. Bond said.

Both Funds are Australian domiciled unit trusts, which Terra Capital believes is of benefit to incoming investors.
“At a time when the plethora of Listed Investment Companies on the ASX are generally trading well below their asset value the Terra Capital funds offer investors the additional advantage of being unlisted and therefore always being redeemable at full asset value,” Mr. Bond said.

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Australian investors and the financial media tend to overly focus on large cap stocks according to boutique investment manager Terra Capital.

“But it can pay to look beyond the obvious,” says Terra Capital’s chief investment officer, Jeremy Bond, as the firm released its latest monthly performance figure for its new small cap vehicle – the Terra Capital New Horizons Fund.

New Horizons Fund has outperformed the All Ords by 23% since inception in January, posting a gain of almost 30% after fees. The fund has also significantly outperformed the ASX Small Ords Index by 16% in the same period. Terra Capital’s longer established Terra Capital Natural Resources Fund is up 300% since inception in July 2010 compared the benchmark performance of -26% (ASX 300 Metals and Mining Index) and -55.7% (ASX Small Resources Index) over the same period.

“Reasons why investors focus on big-stock are of course are understandable, particularly in a market like Australia where just seven stocks dominate the index – four big banks, two miners, and one Telco. These make up almost 50% on the Australian index and are in nearly every investor’s portfolio, with good reason, it has to be said.”

“Our view is not that investors should avoid the majors but that there are excellent and often overlooked opportunities beyond these options.

“As small cap investors, we build a high conviction portfolio of stocks that are often overlooked by investors.

“In September the performance of little known and little covered stock Nvoi Ltd (ASX: NVO) was a significant contributor to the New Horizons fund performance.

“Nvoi Ltd is a good example of a business that the larger market easily overlooks. The Nvoi Platform is a complete ‘workforce-as-a-service’ offering for on-site, non-permanent, white- collar professionals, and Hiring Managers, globally. Nvoi offers a complete validated-candidate search, hiring, billing, and payment, and management service, with Nvoi standing as the employer-of-record in the relationship between Candidate and Hiring Manager.

“Another holding of the fund that is likely to be under most investors’ radar, but we have strong conviction about its prospects, is the US based but ASX listed Updater Inc. (ASX: UPD), which is focused on helping people move home.

“Updater is currently servicing around 70,000 home moves per month in the US and is targeting to service 15% of the market by end of calendar year 2017. Through the use of an extremely user-friendly web application, Updater helps people move home.

“Updater automatically receives time sensitive home mover data approximately 6 to 8 weeks before the actual move occurs, enabling Updater to create an extremely unique mover marketing platform to both help movers make their spending decisions, and facilitate a platform for America’s largest corporations to communicate with those movers before they have made the spending decisions associated with moving home.

“Nvoi and Updater are typical of the small cap businesses that fit our high conviction, high concentration approach.

“Both companies have genuinely innovative business models, globally scalable ideas and in our opinion are businesses that can generate significant cash flow with growth potential courtesy of high-caliber, proven management teams,” Mr. Bond said.

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Investment in food production gaining favour with investors.

Food as an investment theme continues to gain traction amongst investors, both locally and globally says boutique investment manager, Terra Capital.

Terra Capital’s new small cap fund, now open for investments, called Terra New Horizons Fund, has included the Australian based seed developer Abundant Produce (ASX:ABT) in its foundation portfolio as a niche stock with significant potential.

Terra New Horizons Portfolio Manager Matthew Langford said: “The food-related sector continues to attract investor intention and for good reason.”

“World population is growing at 1.2% pa, with Asia a particular growth hot spot. There are issues around availability of fresh water, pest and disease problems, which add to the existing woes of decreasing arable land availability and bigger issues with declining productivity and salinity problems.

“There is general agreement that farmland as an asset, or companies with an ability to improve the use of arable land are likely to out perform most other assets over time. This is why we at Terra Capital have interest in Abundant.

“The commercial seed industry is dominated by a small number of transnational pharmaceutical corporations who have acquired or merged with competing firms. Since the commercialisation of transgenic crops in the mid-1990s the sale of seeds have been dominated by BASF, Monsanto, DowDuPont Agri, Syngenta/ChemChina and Limagrain.

“Abundant are positioning their products as high quality, non-GM seed cultivars which benefits both growers and consumers. They are expected to enter into long-term global sales and distribution agreements in return for loyalty payments,” he said.

Jeremey Bond, Chief Investment Officer and founder Terra Capital added that The Terra Capital New Horizons Fund, which has delivered a 26.2% return in 8 months since its inception, is designed for investors seeking exposure to small emerging companies with the objective of superior absolute returns.

“We will continue to look for companies that offer significant technological or business model innovation.

“Our flagship fund, the Terra Capital Natural Resource Fund, since its inception in June 2010, has significantly outperformed all benchmarks to become a leader amongst its peers, with a return of 26.7%p.a. for investors”, said Bond.

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