Financial performance of mutual and pension funds focused on the natural resources sector

• Published in: Resources policy 2024-06, Vol.93, p.105061, Article 105061
• Main Author: Martí-Ballester, Carmen-Pilar
• Format: Article
• Language: English
• Subjects: Energy; Financial performance; Mutual funds; Natural resources; Pension funds; Precious metals
• ISSN: 0301-4207; 1873-7641
• DOI: 10.1016/j.resourpol.2024.105061

The natural resource sector plays a critical role in advancing sustainable development. However, fossil fuels, precious metals, and mineral extraction require large investments, which mutual and pension funds may assume when allowing fund managers to fulfil their fiduciary duties. This study examines the financial performance of conventional, natural resource, energy, and precious metal-related mutual and pension funds, considering the effects of the COVID-19 pandemic. We adopted a five-factor model with a sample of 42 natural resource funds, 45 energy funds, 45 precious metal funds, and 2172 conventional funds from January 2016 to December 2022. The results indicate that driven by fund managers’ reverse stock-picking skills, the precious metal fund category reaches the lowest mean risk-adjusted return in relation to the energy, natural resources, and conventional fund categories. Additionally, the COVID-19 global health crisis negatively affected the mean risk-adjusted returns on the energy, precious metals, and conventional funding categories. A similar effect is observed in the natural resource pension fund category, while its matching mutual fund category achieves similar financial performance during the non-crisis and crisis periods. •Precious metal fund category underperforms energy fund category.•Precious metal fund category underperforms natural resource fund category.•Fund managers show reverse stock-picking skills.•COVID-19 has negatively affected fund financial performance.