Commodities, led by copper, have started a new bull run on the back of the post-pandemic economic recovery and strong Chinese demand. One way to capitalize on this scenario for local clients is through our Fynsa Total Return Fund.

The Fund today has a 60% exposure to the commodities sector and specifically 22% exposure to the base metals mining sector. Our view is that the bulk of the rally in the mining sector (and commodity-linked companies in general) is ahead of us. This is mainly explained by the following reasons:

• The base metals rally has been very powerful, but if we contextualize it in a long-term time horizon, we are just reaching the levels of the 2016-2018 period (adjusted for US inflation) and still far from the level reached the previous super cycle (2007-2011). 
• We have not seen a re-rating (expansion of multiples) in the mining sector companies, a phase characterized by the concentration of most of the rally in previous periods. On the contrary, most companies in the sector are trading very close to their averages and even at a discount.

In addition to the above, the local stock market is one of the few in the world that currently trades at a discount both versus its own history and in terms of comparable assets, and maintains a wide gap with respect to the historical relationship with copper prices (see attached chart). 

Everything seems to indicate that it is a good time to build positions in the Fund.

IPSA vs Copper