Power Demand Redefines Global Resources

Quarterly insights from Global Resources Portfolio Manager Shawn Reynolds, featuring his unique views on natural resources and commodities.

Key Takeaways:

• Commodities diverged: Gold, copper, and aluminum strengthened; oil and agriculture lagged amid oversupply and weak pricing.
• Power demand reshapes resources: AI, electrification and grid buildout are boosting natural gas and copper while exposing years of underinvestment.
• Selective opportunity ahead: Constrained supply, disciplined capital allocation and geopolitical risk support a constructive long-term outlook for quality resource equities.

Commodities Diverge as Power Demand Accelerates

Risk appetite held up into year-end, supported by sustained enthusiasm for AI-related capex and expectations that policy rates could drift lower over time. At the same time, trade policy uncertainty and tariff dynamics remained recurring drivers of commodity price dislocations, most visibly in oil and copper.

Resource equities split along commodity lines. Metals and mining equities outperformed on strong copper and precious metals price action, while energy equities lagged as crude’s downtrend and oversupply narrative weighed on confidence in forward earnings and capital allocation.

Sector Performance Recap

Oil & Gas

• 2025 was a notably weak year for crude oil with WTI down ~19% (its largest annual decline since 2020). The fourth quarter largely reflected the same pressure points seen earlier in the year, ample supply versus only modest demand, keeping rallies short-lived despite periodic geopolitical headlines.
• Natural gas remained weather-sensitive in the near term, but the structural demand narrative strengthened, as the U.S. surpassed 100 million metric tons of liquid natural gas exports for the first time, supported by new capacity and sustained European demand. By the fourth quarter, gas was increasingly framed as a feedstock for global energy security, rather than solely a domestic heating and power fuel.
• With crude prices range-bound, capital discipline and durable return frameworks remained central to upstream positioning, favoring balance-sheet strength over growth.
• Gas-levered E&Ps and midstream operators benefited from firmer pricing and the AI-related power demand narrative linking gas supply to data center and grid infrastructure buildout.

Renewables & Alternatives

• Renewable energy delivered a stronger than expected fourth quarter and 2025 overall, particularly as financing conditions began to stabilize.
• The key macro driver remained the cost of capital: developers and yield-sensitive infrastructure improved as rate pressures eased, while utilities increasingly traded on load growth from data centers and the scale of required grid investment.
• Clean power procurement accelerated, with hyperscalers continuing to pull forward demand through long-term, structured supply arrangements.

Base & Industrial Metals

• Copper was the standout cyclical bellwether, pushing to new highs in December amid tariff-driven trade distortions, mine disruptions, supply constraints and a demand narrative increasingly tied to electrification and AI-driven data center expansion.
• Copper producers and diversified miners traded on leverage to underlying prices, supported by solid project execution and longer-term supply scarcity driven by long lead times, permitting challenges and capital intensity across new supply.
• Steel markets were more mixed, with prices largely range-bound amid ample capacity and uneven global demand. Steel producers emphasized cost control, balance-sheet discipline and trade protection in the face of ongoing import pressure.

Gold & Precious Metals

• Gold extended its 2025 rally into year-end, reaching new record highs in late December, supported by geopolitical risk, sustained central bank demand, ETF inflows and expectations for future Fed easing.
• Price action remained resilient, with the market consistently treating pullbacks as buying opportunities, reflecting late-cycle behavior as real-rate expectations softened and macro uncertainty persisted.
• Producers broadly benefited from the stronger price tape, though dispersion remained driven by cost inflation, mine sequencing, jurisdictional exposure and capital allocation decisions.
• Precious metals equities re-rated quickly in Q4, reinforcing their sensitivity to policy expectations and liquidity conditions rather than purely geopolitical developments.

Agriculture

• The 2025 agricultural backdrop was defined by weak pricing and farm income stress, prompting the USDA to announce a $12B aid package in early December aimed at offsetting losses tied to low crop prices and trade disruptions.
• Processors and traders faced a challenging fourth quarter, with weak crush margins, cautious policy signals and less favorable selling conditions.
• Ag input suppliers showed mixed performance: fertilizer markets were relatively constructive on firmer pricing and security-of-supply narratives, while crop protection remained pressured by affordability constraints.

Paper & Forest Products

• Pricing remained soft across forest products in the fourth quarter, with lumber largely range-bound after summer weakness and pulp prices still under pressure following their mid-year peak. End markets such as housing and packaging stabilized but did not meaningfully recover.
• Supply discipline dominated industry behavior, with curtailments, mill closures and restructuring actions aimed at rebalancing markets and protecting cash flow.
• Equity performance reflected macro sensitivity, as timber REITs lagged on housing and rate concerns, while private timberland transactions and strategic M&A highlighted long-term asset value despite cyclical weakness.

Portfolio Performance: Drivers and Detractors

Year-to-date, Global Resources Fund (Class A; excluding fees and expenses, the “Fund”) continued to generate strong absolute and relative performance, returning 36.11% versus 28.86% for the S&P Global Natural Resources Index to round out the year. In the fourth quarter, the Fund returned 6.52%, compared with 6.71% for the Index. On an absolute basis, returns were driven primarily by exposure to Gold & Precious Metals, Base & Industrial Metals and Oil & Gas. On a relative basis, Gold & Precious Metals, Renewables & Alternatives and Industrials & Utilities were the largest contributors, while Agriculture, Oil & Gas and Base & Industrial Metals detracted.

Top absolute contributors included Gold & Precious Metals companies Barrick Mining (3.65% of Fund assets) and Pan American Silver (2.10% of Fund assets), both of which benefited from sustained rallies in gold and silver prices, as well as aluminum producer Alcoa (1.21% of Fund assets). Alcoa outperformed on the back of strong aluminum price appreciation, tight supply-demand fundamentals and rising demand expectations tied to power infrastructure and AI-related electrification.

Top detractors included fertilizer producers Mosaic (1.29% of Fund assets) and FMC Corp. (not held), as well as Gold & Precious Metals streaming and royalty company Franco-Nevada (2.11% of Fund assets). Fertilizer producers detracted amid weak farm economics, lower crop prices and concerns around new supply additions, while Franco-Nevada was negatively impacted by valuation sensitivity to interest rates and company-specific production and guidance headwinds.

Average Annual Total Returns* (%) Quarter End as of 12/31/25

^* Returns less than one year are not annualized.

The table presents past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect temporary contractual fee waivers and/or expense reimbursements. Had the Fund incurred all expenses and fees, investment returns would have been reduced. Expenses: Class A: Gross 1.49% and Net 1.38%. Expenses are capped contractually through 05/01/26 at 1.38% for Class A. Investment returns and Fund share values will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV.

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