CQS Natural Resources Growth and Income (CYN) is a differentiated closed-end investment company seeking opportunities across mining and natural resources sectors. It offers investors access to under-researched mid- and smaller-cap companies. While these are inherently more volatile they offer greater upside potential for patient investors. The fund is managed by sector specialists with each of them having over 20 years of experience in industry and/or investments. The day-to-day management of the portfolio is undertaken by Keith Watson and Rob Crayfourd (who focus on equities) and Ian Francis (who focuses on fixed income).
1. CYN actively repositions its portfolio to capture the most promising themes in the sector
The company has a flexible mandate, and it is actively managed with the manager shifting allocation to underlying commodities based on where they see the most attractive risk-reward profile, looking to maximise returns and reduce volatility for investors through the cycle. In the current environment the company’s portfolio has a relatively high exposure to precious metals and oil and gas. The fund also retains a meaningful exposure to uranium as it expects a significant global supply shortfall in the long term.
2. Several catalysts support continued strength of gold prices
Gold prices have risen significantly over the past three years due to a combination of monetary factors, central bank buying and geopolitical risk. At this point in the cycle, the case for gold equities appears particularly compelling, as in our view, equities are yet to fully reflect this commodity price strength. The company also views the industry as having capacity for further dividend growth and M&A, both of which tend to be catalysts for resolving valuation anomalies.
3. The company consistently outperforms the broad market
Investments in early stage companies require patience, which the company’s shareholders are rewarded for with an attractive performance over the long term, supported by the company’s active approach to commodity allocation and stock picking skills. Over the five years ending December 2024, its NAV TR was above that of the MSCI World Metals and Mining index, as well as the MSCI World Energy index.
4. The management is committed to providing shareholder-friendly measures
The company is subject to a continuation vote each year, which provides shareholders with an option of a full cash exit at NAV, which they have not utilised so far, likely in appreciation of CYN’s distinct strategy and outlook. The company also pays regular quarterly dividends and performs share buybacks. Furthermore, CYN’s board recently commenced a review process to address the prevailing discount to NAV and aims to announce its outcome by June 2025.
Published 29 January 2025.
