January 18, 2017 - 10:00 AM EST
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Investing Veteran Leigh Goehring Launches Natural Resources Mutual Fund

New Research from G&R Associates Shows Oil Prices May Rise to $100 in 2018

Goehring & Rozencwajg Associates (“G&R Associates”) today announced the launch of the Goehring & Rozencwajg Resources Fund (the “Fund”) (Institutional Class Shares: GRHIX) (Retail Class Shares: GRHAX), a series of Goehring & Rozencwajg Investment Funds (the “Trust”). Leigh Goehring, one of the leading authorities in global commodity investing, and long-time partner Adam Rozencwajg, will manage the Fund.

The Fund will invest primarily in securities of companies and other investments that provide economic exposure to natural resources, including oil, natural gas, precious and base metals, ferrous and non-ferrous metals and agriculture. Mr. Goehring and Mr. Rozencwajg have a combined 35 years of resource investing experience and focus on taking large contrarian bets based on their investigation of market and commodity data. They seek to use their data and related research to spot turning points that may not be widely appreciated by the market and uncover value when prices are depressed and investors are often bearish.

“We believe that natural resources is a frequently misunderstood asset class that few investors have the expertise, experience and patience to understand,” said Mr. Goehring, Managing Partner at G&R Associates. “Adam and I love to explore significantly underappreciated trends that develop in global natural resources markets – trends that, in our view, often have huge investment implications. Our research projects often become odysseys in themselves, but many times these journeys formulate fundamental opinions and investment ideas that we believe both investors and company management teams have come to rely on.”

Mr. Goehring and Mr. Rozencwajg originally collaborated at Chilton Investment Company, where they managed upwards of $5 billion in assets within Chilton’s global natural resources strategy. Prior to Chilton, Mr. Goehring served as the manager of the Prudential-Jennison family of natural resources funds, managing over $3 billion at their peak. Mr. Rozencwajg previously worked in the Investment Banking department at Lehman Brothers and the MLG group at Neuberger Berman.

“Investing in natural resources is our passion. We believe the Fund provides a low-cost investment vehicle that allows retail and institutional investors to add an important commodities component to their portfolios. And most important, it comes with an experienced team that has several market cycles of natural resource investing experience,” said Mr. Rozencwajg, Managing Partner at G&R Associates. “Whether through direct contact with us or through our investor letters, our clients have come to expect insight, honesty and transparency when investing with us – values that we believe will have an extremely broad appeal.”

The Fund is distributed by ALPS Distributors, Inc. which is not affiliated with G&R Associates, the Trust or the Fund. ALPS, A DST Company, 1290 Broadway, Suite 1100, Denver, CO 80203. All investments are subject to risk, including the possible loss of the money you invest.

An investor should consider the investment objectives, risks, charges and expenses of the Fund (or of the Investment Company) carefully before investing. This and other important information can be found in the Fund’s prospectus. To obtain the Fund’s prospectus, please call 1-844-464-6467 or visit www.gr-funds.com/prospectus. Read the prospectus carefully before you invest.

Latest Insights: $100 Oil in 2018?

Known for contrarian viewpoints, G&R Associates believes we may now be at the beginning of a major oil price climb that could rival the record prices consumers saw in 2008.

In 2006, ahead of record oil prices, Mr. Goehring wrote extensively about the flaws in the International Energy Agency’s (IEA) data regarding the oil market and concluded that the Organization of the Petroleum Exporting Countries’ (OPEC) production cuts were not needed. “Our analysis suggests that the call on OPEC oil production will increase substantially again in 2007, and I see the global oil market becoming tighter with prices risk increasing to the upside,”1 Mr. Goehring wrote in October 2006. As the world came to find, Mr. Goehring’s analysis was right. The IEA had significantly overestimated non-OPEC oil supply and underestimated global demand. Oil prices peaked at $145 per barrel within 18 months.

In much the same way as the IEA’s figures misrepresented the market in 2006/2007, G&R Associates believes today’s numbers are also flawed. Here’s why:

1. Inventories are Drawing: While the IEA claims that the oil market is over-supplied today, G&R Associates’ modeling suggest inventories are likely drawing sharply relative to normal levels,2 similar to 2006/2007. Per IEA data, inventories were expected to grow by 1.1 million barrels per day (mmb/d) in the fourth quarter of 2016, but, based on data available through November, G&A Associates believes inventories have likely drawn down by one million barrels per day3. The IEA appears to be dismissing the fact that oil prices have nearly doubled from their 2016 lows.

2. Non-OPEC Production in Decline: G&R Associates also believes that the IEA is very likely over-stating non-OPEC supply growth for 2017, just like it had in 2006/2007. In particular, Canadian production is expected to grow by 200,000 barrels per day in 2017—which would represent its strongest growth since 2014—despite Canadian rig count declines of more than 50% in three years.4 Similarly, the IEA has projected that non-OPEC production outside of North America will grow by 120,000 barrels per day in the aggregate, even though this category has actually declined in four of the last six years and international rig count is at an eleven-year low.5

G&R Associates’ conclusion is that the oil market has quietly slipped into deficit. G&R Associates believes that the steady oil price advance over the course of 2016 has largely been “explained away” by market participants and the pervasive bearish reports have led OPEC to announce very large production cuts at exactly the wrong moment. “If OPEC cuts even a fraction of what they have announced, it is our estimation that the world oil markets will end up severely under-supplied by over 600,000 barrels per day during 2017, more than twice as under-supplied as the market was in 2007/2008 that caused prices to surge,” said Mr. Goehring.

The information contained in this press release is the opinion of the authors and is subject to change without notice. This press release should not be considered investment advice, nor should it be considered predictive of investments that the Fund may make or choose not to make.

About G&R Associates

G&R Associates is a registered investment advisor that focuses exclusively on the natural resources sector, with a key focus on independent and original research, both at the commodity level and at the company-specific level. The firm prides itself on in-depth and frequently contrarian insights across a wide range of investments within the natural resources sector, including oil and natural gas, precious and base metals mining, ferrous and non-ferrous metals and agriculture. The firm was founded by Leigh R. Goehring and Adam A. Rozencwajg who together have 35 years of natural resource investing experience.

 

ALPS Control Number: GRA000110 Expiration: 1/31/2017.

 

1

Chilton Investment Company Global Natural Resources Third Quarter Commentary, October 10th 2006.
2 Source: International Energy Agency Oil Market Report (12/13/16) and Goehring & Rozencwajg Associates Models.
3 IEA OMR (12/13/16) and Goehring & Rozencwajg Associates Models.
4 IEA OMR (12/13/16) and Baker Hughes Inc.
5 IEA OMR (12/13/16), BP Statistical Review (2016 Edition) and Baker Hughes Inc.
 

For G&R Associates
Mark LaVoie, 212-279-3115 Ext 233
[email protected]


Source: Business Wire (January 18, 2017 - 10:00 AM EST)

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