BAKERSTEEL Electrum Fund Q2 2021 Investment Manager’s Commentary


  • Industrial metals performed well, as the recovery from COVID-19 progressed.
  • Speculation over potential US rate hikes dampened investor sentiment towards certain metals.
  • Electrum remains focused on producers of “future facing”metals, alongside precious metals equities.

Q2 Top performers:

  • Mineral Resources
  • Capstone Mining
  • Wheaton Precious Metals

Q2 Underperformers:

  • AngloGold Ashanti
  • AMG
  • Harmony Gold

Fund Performance

BAKERSTEEL Electrum Fund (“Electrum Fund”) rose +1.7% (I2 EUR class) during the quarter compared with the EMIX Global Mining Index (“the Index”) which rose +6.2% (in Euro terms). Further Fund details, including performance, can be found here.


Strong performance by iron ore majors caused the Fund to lag its Index somewhat during the quarter. In our view this represents a short-term phenomenon, and we maintain our conviction that Electrum’s focus on “future facing” metals equities, alongside precious metals miners, while avoiding bulk commodities and fossil fuels, offers targeted exposure to the secular growth trends within the mining industry, in accordance with our ESG principles.

Longer term, the Electrum Fund has continued to deliver strong outperformance. Since the Fund’s launch two years ago, Electrum has gained +95.7% (I2 EUR class), compared to the Index which has risen +45.7% (data in EUR terms).

Market Update

The economic recovery from the COVID-19 crisis has continued and, while certain sub-sectors of the mining industry have seen strong performance, others have lagged. The reflation trade drove metal prices generally higher during the period, led by steel and steel-related commodities, which were stand-out performers. Iron ore prices rose by +36.9% while ferro vanadium has risen +19.2% (in USD terms). Yet a range of other commodities came under pressure from speculation over the outlook for US interest rates following the US Fed’s hawkish shift during June, along with more general concerns over how policymakers will deal with rising inflation.

Copper and silver, two core metals for the Electrum Fund’s strategy, gained +6.7% and +6.1% respectively during the quarter (in USD terms), but both metals came under pressure in June as rising higher US yields impacted investor sentiment towards both metals. Copper also faced headwinds during the month from the announcement of Chinese state sales of reserves. The Fund’s exposure to copper has been reduced since the end of Q1 2021, limiting the impact of this decline on the portfolio, yet we have retained certain copper positions given the metal’s core role in green technology and electrification. Battery metals made gains during the period, with lithium prices rising +18.8%, nickel rising +13.7% (in USD terms), while cobalt declined slightly. We continue to see extreme tightness in certain battery related materials until the end of the year at least.

Gold had a positive quarter, rising +3.7%, amid shifting investor sentiment towards precious metals. While the prospect of a period of higher inflation is a bullish factor for gold, which has historically proved to be an effective inflation hedge, the prospect of higher nominal interest rates continues to weigh on the sector. We continue to believe that precious metals miners remain undervalued on a fundamental and relative basis. Gold equities (XAU Index) have operating margins of 30.8% but are trading at 7.2x EV/EBITDA, representing substantially better value relative to broader equity markets. Both the S&P500 index and NASDAQ have operating margins of around 13% but trade at 15.2x and 24.4x EV/EBITDA (all data as at 30 June 2021). These multiples give some idea of the extent of relative undervaluation in the precious metals sector, alongside the fundamental value which we seek as active, value-driven investors.

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