Goehring & Rozencwajg latest research on global commodity markets, Why the Tanks Have Not (Yet) Run Dry, is now available.
In the Q2 2026 letter, G&R look at several important disconnects emerging across natural resource markets—between price and fundamentals, investor expectations and physical supply, and prevailing narratives and the data beneath them.
Written by: Laurence Parker-Brown, The Inside Advisor
For advisers, the case for commodities is becoming less about short-term price moves and more about structural scarcity. After a decade in which many parts of the natural resources sector were starved of capital, supply is no longer as flexible as markets may assume. That supply-demand mismatch is captured in the one-year returns of the Goehring & Rozencwajg Australian unit trust, which celebrates its one-year anniversary with a return of 70.7 per cent (as of 28th April 2026).
Adam Rozencwajg (pictured, left, with partner Leigh Goehring), managing partner at New York-based Goehring & Rozencwajg Associates, says this capital cycle is the key to understanding the opportunity. “The biggest driver for commodity prices going forward is the lack of investment over the past 10 years,” he says.
This is a useful framing for advisers. Commodity markets often look volatile at the surface, but the deeper story is supply discipline. Mines take years to approve and build; oil and gas fields decline naturally. New production cannot appear just because prices move higher.
When supply has been underfunded and demand keeps rising, markets can move from surplus to deficit quickly. That is when commodities can become powerful portfolio diversifiers.
Inflation protection with a structural tailwind
The inflation argument is central to the current resources case. Higher commodity prices do not just reflect inflation: they can also drive it, particularly when energy, materials and food costs are involved.
Rozencwajg believes inflation is likely to remain a recurring issue. “We believe inflation will continue to be a concern throughout the decade, just like in the 1970s,” he says.
For advisers, that makes natural resources relevant again. The traditional 60/40 portfolio has been tested by periods where bonds and equities fell together. A measured exposure to commodities can add a different return driver, one linked more directly to real assets and physical scarcity.
“Commodities historically have been a good way to protect against bouts of inflation,” says Rozencwajg.
This does not mean commodities should replace equities or bonds; it means they can do a different job. They can give client portfolios exposure to rising replacement costs, constrained supply and currency debasement risk.
Rozencwajg says investors should consider natural resources “as a source of uncorrelated return and a hedge against inflation or currency devaluation.” That is the cleaner adviser conversation. The allocation is not about chasing the latest oil price move; it is about preparing portfolios for a world in which inflation may be more persistent than the last cycle suggested.
Finding value before consensus returns
The strongest resources opportunities often appear when investor sentiment is weak. That can make the timing uncomfortable, but it is also where valuation discipline becomes important.
“We have always felt that the best time to find value is when investors are pessimistic and commodities are depressed,” Rozencwajg says.
His firm’s approach combines top-down commodity analysis with bottom-up stock selection. It first looks for sectors where capital has been withdrawn, prices are depressed and supply risks are building. It then seeks listed equities that provide direct exposure to those themes.
That distinction matters for advisers. A specialist resources fund is not the same as buying broad-market equity exposure with a few large miners attached. Rozencwajg says the firm tends to avoid the largest integrated or diversified companies when they do not provide the direct exposure it wants.
The capital cycle is turning
The portfolio role is therefore specific. A natural resources allocation can give clients access to commodity price upside, earnings leverage and real asset sensitivity. It may be especially useful for investors who understand that the opportunity depends on the cycle, not quarterly noise.
The current backdrop gives advisers a strong framework. Underinvestment has reduced supply flexibility. Demand remains robust. Inflation risk has not vanished. Geopolitical events may act as catalysts, but the structural driver is the capital that was not spent.
For advisers building portfolios for the next decade, that is the point. Commodities are not just a tactical trade. They may be one of the more direct ways to hedge a world where demand keeps growing and supply struggles to catch up.
See the original article here.
Laurence Parker-Brown is head of content at The Inside Network and managing editor of The Inside Adviser and Investor Strategy News.
The Trust raised approximately $205 million through its initial public offering and will invest in a diversified portfolio of investment-grade Australian and global fixed income securities, alongside Australian private asset-backed securities typically structured through warehouse financing. Proceeds from the IPO will be invested in accordance with the Trust’s investment strategy. KIT targets a return of RBA Cash Rate plus a 3.5% margin per annum while providing investors with monthly distributions.
Importantly, the IPO was completed against a backdrop of heightened global market volatility and geopolitical uncertainty, highlighting the strength of the investment strategy and the credibility of the team at Kapstream Capital, which manages more than $12 billion across credit strategies.
The venture began nearly a year ago when a wealth management team approached Mantis Funds seeking an income-focused investment solution. The result was the creation of a listed investment trust structure designed to deliver regular income and a consistent margin above cash. The venture involved close collaboration between the investment manager, distribution partners and advisers.
Key leadership came from Kapstream Capital’s investment team including Dylan Bourke, Daniel Siluk and Mark Bayley, while the initiative was driven on the distribution side by Damien Hatfield and Timothy Cheung of Mantis Funds. The broader Mantis team supporting the transaction included Anthony Ng, Mike Healey, Archie Taylor, Rachel Walker, Kwame Owusu and David Gray.
“Timothy Cheung and myself would like thank our Mantis Funds team, in particular those members who fly under the radar but punch above their weight. I couldn’t ask for a better team to work with. Many thanks to the Kapstream team who are true professionals highlighted by the fact that they manage in excess of $12 billion in Credit Funds. I’d also like to acknowledge Janus Henderson Investors for their support throughout this project.”
Damien Hatfield, Founder and Head of Distribution, Mantis Funds.
The IPO was supported by a strong syndicate of advisers and distribution partners, including Ord Minnett, which acted as Joint Lead Arranger and Joint Lead Manager. Additional support came from CommSec, Evans & Partners, Taylor Collison and MST Financial, with key contributions from Steve Anagnos, Cameron Duncan, and Gerard Satur. Legal support was provided by Corrs Chambers Westgarth, and the project was further strengthened through collaboration with Janus Henderson Investors.
The Trust is now listed on the ASX, marking the successful culmination of a year-long collaborative effort across multiple firms and teams.
With the IPO completed, the focus now shifts to executing the strategy and delivering consistent income outcomes for investors through the Kapstream platform.
For investors seeking further details, the latest trading price and market information for Kapstream Investment Trust (ASX:KIT) can be viewed here or on the ASX website.
Written by: Jonathan Shapiro, Senior Reporter, Financial Review
Kapstream is the latest fixed income fund manager to target new investors on the Australian Securities Exchange after appointing brokers to raise up to $300 million via a listed investment trust.
The $12 billion Sydney-based fixed income manager says the transaction was in direct response to its clients looking for clients looking for an alternative to bank hybrids, which are being phased out by the prudential regulator. The deal adds to the already $10 billion of ASX-listed securities issued by debt funds.
The new LIT is targeting a return of 3.5 per cent above the Reserve Bank of Australia’s cash rate. It plans to invest half the capital in public market debt and the other half in private credit, or more specifically secured funding to other lenders via so-called warehouses. With brokers targeting up to $300 million, they have already attracted a cornerstone investment of at least $145 million. But Kapstream’s decision to opt for a LIT over an increasingly popular $2 billion listed note structure is worthy of discussion.
It demonstrates the different views on the best way to structure and sell fixed income securities on the exchange so that costs are managed and investors are less exposed to the dreaded trading discounts that have plagued LITs and their close cousins, listed investment companies. Until last year, private credit funds that wanted to raise money on the ASX only really had one option: the listed investment trust.
Managers such as Metrics, Gryphon and Qualitas hired brokers and raised hundreds of millions of dollars via primary and secondary raisings, tapping demand for high and reliable income.
These funds are closed-end structures, which means once the money is raised it never really leaves.
An investor can only exit the investment by finding another buyer on the listed exchange. This means when demand is strong the price can trade above the net asset value, or at a premium. But when demand is weak and markets are wobbly, the price can fall below the asset value. While debt LITs have delivered on their promises of stable income, there have been prolonged periods where they have traded at material discounts. This has effectively prevented investors from pulling their money without copping the penalty, and left a tinge of bitterness, particularly for those who bought in at the initial raising. In fact, two international managers – Partners Group and Neuberger Berman – relented to that pressure and wound down their LITs because of the persistent discounts.
So fund managers have tried to come up with solutions to this problem, and in 2025 the listed note market was created, basically from scratch.
Last year alone, the likes of Realm, Challenger, Real Asset Management, MA Financial and Stonepeak raised $2 billion via listed notes. In this instance, they issued securities that pay a fixed margin over the cash rate for a set period of time, typically five years.
The proceeds are then invested in a portfolio of fixed income assets while the manager sets aside some capital for potential losses. And instead of charging a management fee, the fund simply keeps the difference between the interest earned on its fixed income investments and agreed interest paid to investors.
The fixed maturity date means that eventually investors will be repaid their full amount, and so the securities aren’t likely to trade at a material discount to the underlying assets.
Kapstream portfolio managers Dylan Bourke and Mark Bayley say they considered the note structure, but opted for the LIT instead.
One of the reasons is that they believe the overall returns to investors tends to be higher in the LIT structure because there is no excess interest retained by the manager.
A LIT structure, they argue, avoids “splitting liquidity”, as investors trade in and out of various notes searching for the best relative value, rather than attracting buyers and sellers to a single fund product.
Kapstream also believes that a relatively new feature that allows investors to redeem up to 5 per cent of the fund each quarter at the net asset value will also help keep discounts in check.
The trusts versus notes debate will likely continue throughout the year as more funds tap the listed market and capture the $43 billion of capital invested in bank hybrids that is seeking a new home.
So far, the demand among investors for high-income means both notes and LITs are trading at or above their net asset value. Among the 10 listed investment trusts with a combined market value of $8 billion, the average trading price is 0.5 percentage points above the NAV.
As for listed notes, the average trading price is $99.73 – a quarter of a percentage point below the $100 face value.
So both structures appear to be working as intended. But there will inevitably be stress tests ahead.
Jonathan Shapiro writes about banking and finance, specialising in hedge funds, corporate debt, private equity and investment banking. He is based in Sydney.
A Mantis Research Paper
We believe the Australian hedge fund market is approaching an important inflection point as investors increasingly seek scalable, resilient strategies capable of delivering genuine diversification in a more volatile global environment. However, many investors are still bewildered by the breadth of strategies out there. Separating the pretenders from the real deal can be challenging.
We have put together a white paper to serve as an updated introduction to the +$60 billion Australian hedge fund industry. It covers:
Click here to read more.
A Mantis Research Paper
We believe that we are on the cusp of a rapid disruption in the financial industry as Artificial Intelligence (AI) becomes a game changer in the world of alpha generation.
To that end we have attached a brief white paper, “Artificial Intelligence, Natural Alpha” which covers our thoughts on:
With the neural complexity of AI accelerating exponentially, we hope this paper provides a timely exploration of the opportunity AI provides for managers who are able to stay ahead of the curve.
Recently Mantis Funds CEO, Timothy Cheung, appeared on AusBiz The Open to discuss alternative investments and finding opportunity in AI infrastructure.
In the episode Tim highlighted growing interest in alternative investments, with a current focus on opportunities arising from the artificial intelligence (AI) boom. He also addressed the flourishing private credit landscape, pointing out that Australian investors may have been slow to move into this space compared to institutional players.
Focus on alternative investments such as hedge funds, private equity, and private credit
AI infrastructure companies like CoreWeave (recent IPO) seen as major opportunity
Private credit funds can offer double-digit yields with low default risk
Non-bank lenders benefitting from gaps left by major banks in lending markets
Tim will be appearing on ‘The Open’ at 10:20am the last Thursday of each month, starting 28th August 2025, with Australia’s best strategists, stock pickers and macro minds.
A Mantis Research Paper
As ‘black swan’ sightings become increasingly common, tail-hedging strategies, which are designed to protect portfolios during extreme market downturns, are drawing renewed attention from investors seeking resilience in uncertain markets.
In light of current market conditions, marked by high valuations, a relatively low VIX and escalating geopolitical tensions, we hope the attached paper, “If it looks like a black swan and swims like a black swan”, provides a timely analysis of the tail hedging strategy.
Specifically, we examine:
A Mantis Research Paper
Given the current period of elevated global uncertainty, we have been considering effective opportunities to hedge against potential stock market volatility.
To that end, we have a brief white paper which covers our thoughts on the Merger Arbitrage strategy:
We hope it provides a timely exploration of the value that market-neutral, absolute return hedge fund strategies such as merger arbitrage can bring to a portfolio.
Mantis is excited to announce that we have partnered with Balmoral Investors to bring the Balmoral Investors Micro Cap Fund (the “Fund”) to Australian investors. The Fund provides a diversified portfolio of quality micro-cap companies with a focus on those with a market capitalisation of less than $750 million at the time of investment.
“There is strong and growing interest from private clients and their advisors in quality micro-cap investments managed by seasoned investors. However, accessing experienced portfolio managers with capacity is very challenging. We are privileged to have reconnected with our old friends and colleagues, Tim Canham and Wik Farwerck, to bring their capability to our clients. Tim and Wik have outstanding track records in the micro-cap universe and we are excited to see how they blossom in their new (wholly investment owned) guise,” said Damien Hatfield, Partner and Head of Distribution at Mantis Funds.
“We are delighted to be able to offer a new capability in micro-cap investing, albeit with two experienced portfolios managers at Balmoral Investors. For too long micro caps have been seen as simply an addendum to small cap investing. We disagree with that and believe it is a very different skill set given the size, liquidity and capital constraints micro-cap companies face. We see this part of the market as very under-researched and below the radar of the passive investor cohort. Valuations are as attractive as I have seen across my career” said Tim Canham, portfolio manager at Balmoral Investors.
“After managing one of the largest micro-cap products in the market at circa $500 million for over 15 years, with a strong record of alpha generation, we are very well equipped to invest in this space. By concentrating on a specific part of the sharemarket, namely stocks with a market cap below $750 million, we can focus our research and stock picking expertise. Our ability to maintain continuity with our previous portfolio construction methods, detailed financial modelling and investment process has given Balmoral a fast start to creating a new investment house” said Wik Farwerck, portfolio manager at Balmoral Investors.
For more information, please contact Damien Hatfield, Mantis Fund’s Head of Distribution, via e-mail (damien.hatfield@mantisfunds.com) or at 0400 560 240. You can also visit www.mantisfunds.com.
About Balmoral Investors
Balmoral Investors is founded by two experienced senior portfolio managers, Wik Farwerck and Tim Canham. As a team they have a long track record of successful small and micro-cap bottom-up investing at Colonial First State Global Asset Management and then First Sentier Investors. Together they ran over $1 billion in funds under management for over 15 years with strong risk adjusted returns, outperforming the relevant benchmark by 8.3% pa over that period.
Balmoral Investors is an independent investment firm owned 100% by the Founders and domiciled in Australia. The firm has been set-up for the sole purpose of providing investors with exposure to the smaller end of the Australian sharemarket, managed by two experienced small cap investors. Over many years, the team’s investment process and valuation discipline has traversed across many investment cycles from the GFC, Euro Debt crisis, commodity collapse of 2015 and COVID.
Over 30+ years in the investment markets, the team has built up a significant network of financial industry and corporate relationships. This network, coupled with detailed financial modelling and stock thesis work, provide the solid basis for the construction quality small/micro cap portfolios
For more information, please visit: Micro-Cap Investments, Small Cap Investments | Balmoral Investors
About Mantis Funds
Mantis Funds was launched in 2020 by industry veterans Damien Hatfield, Timothy Cheung, David Gray and Mark Paton. Mantis helps its boutique alternative investment managers deliver alpha to end-investors through its integrated distribution and operations platform. As at December 2024, Mantis has fifteen boutique partners spanning a range of actively managed strategies and asset classes who collectively manage more than $50 billion.
Mantis is majority owned by its management team while Tribeca Investment Partners are a strategic shareholder.
For more information, please visit: www.mantisfunds.com
Disclaimer: The material contained in this communication is general information only and has been prepared by Balmoral Investors Pty Ltd (“Balmoral Investors”), a Corporate Authorised Representative of Mantis Funds Services (AFSL 531027). It is not intended to take the place of professional advice and you should not act on any information made in this communication without first consulting your investment advisor in order to ascertain whether the information is appropriate, having regard to your investment objectives, financial situation and particular needs. Nothing in this communication shall be construed as a solicitation to buy or sell a security or to engage in or refrain from engaging in any transaction. Balmoral Investors believe that the information contained herein is correct at the time of compilation. However, Balmoral Investors, Mantis Funds Pty Ltd, and Mantis Funds Services Pty Ltd provide no representation or warranty that it is accurate, complete, reliable or up to date, nor does Balmoral Investors, Mantis Funds Pty Ltd, and Mantis Funds Services Pty Ltd accept any obligation to correct or update the opinions (if any) in it. The opinions (if any) expressed are subject to change without notice.
Balmoral Investors, Mantis Funds Pty Ltd, and Mantis Funds Services Pty Ltd do not accept any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of the material contained in this communication. This communication may refer to the past performance of a person, entity or financial product. Past performance is not a reliable indicator of future performance. Investors should obtain the relevant product disclosure statement and consider it before making any decision to invest.
