Sell investment trust BlackRock World Mining Trust (BRWM) and just buy BHP (BHP), Rio Tinto (RIO) or a relevant exchange-traded fund if you want exposure to the mining sector.

That’s the view put forward in a critical note on BlackRock World Mining by Investec analysts Alan Brierley and Ben Newell, who have downgraded the trust from ‘hold’ to ‘sell’ and say both it and the mining sector have endured a ‘decade of lost returns’.

They calculate that the net asset value (NAV) total return of the trust over the past decade, sterling-adjusted, is just 4%, compared to 567% for the US Nasdaq stock index for example, and add that it could get worse for the trust and the sector with ESG headwinds looming in a post- Covid world.

Brierley and Newell also suggest BlackRock World Mining’s directors could be ‘airbrushing history’, noting the decision to move away from the EMIX Global Mining index as a benchmark and instead using MSCI ACWI Metals & Mining 30% Buffer 10/40 index.

While taking no issue with which benchmark is most appropriate, they said they are ‘extremely uncomfortable with the concept of simply dropping the old reference index and replacing it with one which has produced much lower returns in recent years.’

The new index’s five-year total return of 67.1% is considerably lower than the 95% recorded by the previous benchmark. Over this period, the trust’s NAV total return is 78.6%.

‹ Previous2020-08-27Next ›