BlackRock Inc's US$15 billion World Mining Fund rose the most among Europe's 10 largest stock funds in the worst year for equity investors since 2003.
The BlackRock fund, managed by Evy Hambro in London, rose 61 percent last year as of Dec. 27, compared with the average 3.3 percent return of stock mutual funds sold in Europe. Fidelity International's European fund was second, up 12 percent. Jupiter Income Trust was the worst of the 10 largest funds managed in Europe, down 4.9 percent after manager Anthony Nutt sold mining shares.
"It's absolutely no surprise that a mining fund would excel given the rise of commodities and the uncertainty in most stock markets," said Ben Yearsley, a financial adviser who sells mutual funds at Hargreaves Lansdowne Plc in Bristol, England.
The Morgan Stanley Capital International World Metals and Mining Index advanced 40 percent through Dec. 27 as iron ore and nickel reached record prices. The MSCI World Index, a measure of global stock markets, rose 7.2 percent, the smallest gain in five years, as US subprime-mortgage defaults prompted about US$100 billion of writedowns at the biggest financial institutions and concern about a global economic slowdown.
Europe's Dow Jones STOXX 600 Index, a regional benchmark, was little changed after rising for four years. The best group in the index was companies involved in basic resources such as mining, where returns were 28 percent. The worst performers were banks and travel and leisure companies, both down 17 percent.
EMERGING MARKETS
Hambro, 35, who has managed BlackRock World Mining since it opened in 1997, said the fund, the largest of its kind, benefited from decisions he made three years ago. Back then he bet that companies mining for metals would rise because of demand for building materials in emerging markets such as China and India.
China accounts for 25 percent of global demand for copper, up from 5 percent in 1990, Hambro said. The most populous nation now uses 40 percent of the world's iron ore, up from 7 percent.
"We are patient investors," Hambro said in an interview. "China today is the largest consumer of all commodities. Ten years ago they would hardly have featured."
Among his best investments was Rio de Janeiro-based Cia Vale do Rio Doce, the world's largest iron ore producer, which was up 84 percent. The cost of the metal may increase another 50 percent this year, estimates from Sydney-based Macquarie Bank Ltd show.
Nickel, Vale's second-biggest source of income, has increased eightfold in the past five years.
Hambro also bought shares of Moscow-based OAO GMK Norilsk Nickel, the world's biggest producer of nickel and palladium, which gained more than 69 percent last year.
His investment in Freeport-McMoRan Copper & Gold Inc, the world's second largest copper producer, advanced 87 percent.
Fidelity International's US$9.6 billion European fund advanced after manager Tim McCarron in London sold financial stocks.
"An underweight position in banks helped relative returns, given the ongoing concerns about the impact of defaults in high-risk home loans," McCarron wrote in a note sent to clients.
His biggest holding at the end of October, accounting for 4.2 percent of the fund, was E.ON AG, Germany's biggest utility. The Dusseldorf, Germany-based company advanced 40 percent last year.
He also held Biel, Switzerland-based Swatch Group AG, the world's biggest watchmaker, which rose 27 percent.
COSTLY DECISION
Jupiter's Nutt said he underperformed rivals and his index after selling shares of mining companies such as Antofagasta Plc, the London-based copper producer controlled by Chile's Luksic family, which rose 48 percent last year.
"We chose to take these substantial profits in 2007 as valuations looked full," London-based Nutt said in an e-mail. The decision "cost us," he said.
The fund also stumbled because of holdings in UK property companies such as London-based British Land Co, whose shares fell 45 percent.
"The growing credit crisis and increasing difficulty in raising finance has led markets to take a very pessimistic view of the prospects for commercial property," Nutt said. "Either we are in for a very bad time or the market has over-reacted."
Another poor performer among Europe's largest funds was Franklin Resources Inc's Templeton Growth (Euro) Fund, which declined 7.8 percent.
The fund is a European version of the company's 53-year-old Templeton Growth Fund, sold in the US.
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