LONDON (Reuters) – Investors are shunning the mining sector, data from Thomson Reuters shows, as they struggle to forget the string of multi-billion dollar takeovers and expensive development projects that left them empty handed.
A decade-long commodity boom coincided with years of economic growth when China took off, but when the global economy slowed, so did the market for commodities from oil to copper.
Data shows that two years after the worst of the raw materials slump is over, investors are still not ready to pour in fresh funds despite a price rally. The mining sector .FTNMX1770 led the FTSE higher in 2016 as it rebounded from the previous year’s deep price crash, but it is still well below levels seen in 2011.
Thomson Reuters data shows mining funds shrank slightly last year after a surge in 2016. Returns of 16 UK-domiciled natural resources funds fell 2 percent last year after a 74 percent increase in 2016. Assets under management fell to 3.78 billion pounds ($5.3 billion) last year from 3.81 billion in 2016.
“It seems that investment in mining companies has gone from sector-specific funds to generalist and more diversified funds. After the good bounce in 2016 people may have decided to take their money out of sector specific funds,” Investec Asset Management portfolio manager Hanré Rossouw said.
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