DNB Critical Materials

DNB Critical Materials provides equity exposure to metals and materials through established, liquid, and capital-strong companies, as opposed to direct commodity exposure or narrowly themed investments.

The fund stands out in several ways:
Investment occurs through publicly listed mining and materials companies, not through commodity futures or physical exposure.
The portfolio is deliberately concentrated on larger, established players, with long reserve lives and documented ability to operate through commodity cycles.
The fund seeks broad exposure to multiple metals and application areas, and is not limited to a single technology or a narrow commodity segment.

This makes the fund suitable as a long-term, thematic supplement for investors looking for exposure to materials that are important input factors in global value chains, while also understanding the risks in the sector.

The fund invests in established, liquid, and solid mining and metal companies, primarily within:

- Gold (producers and royalty companies) (Approx. 40-45% of the fund)
- Diversified metals and mining industry (Approx. 40-45% of the fund)
- Copper (Approx. 10-15% of the fund)

The companies are large and mid-sized publicly listed companies characterized by:
- Market capitalization over 10 billion USD
- Strong market position and long life of reserves
- Operations in multiple jurisdictions
- Ability to operate through commodity cycles

The portfolio is concentrated around larger players, with a conscious exclusion of smaller, high-risk projects and companies in violation of DNB's Group Instructions for Responsible Investments. The investment universe currently consists of just under 30 companies.

Individual investments are limited by UCITS regulations so that a single investment can at most constitute 10% of the fund and the 5 largest companies will at most constitute 40% of the fund.

Structural demand drivers
The demand for metals is influenced by several long-term trends, including:

- Electrification of transport and industry
- Expansion and modernization of energy infrastructure
- Digitalization and increased material intensity in technology products
- Growing focus on supply security and strategic raw materials

As a result, copper and other industrial metals are increasingly referred to as factors of production in the global economy and in infrastructure development.

Gold as a financial counterweight
Gold has historically served as:

- A hedge against inflation
- A counterweight during periods of financial and geopolitical tensions
- A diversifying element in equity portfolios

A significant portion of the portfolio is exposed to gold and gold-related companies.

Operational gearing
Mining companies often have high operational gearing to metal prices. Small changes in commodity prices can thus lead to relatively large fluctuations in cash flow and results, both positive and negative.

Risk characteristics
This is an equity fund with high volatility. Key risk factors include:

Market and commodity risk
- The fund's value is affected by the development of metal prices
- Commodity markets can be volatile and cyclical

Company and operational risk
- Mining involves technical complexity
- Production interruptions, cost overruns, and regulatory changes can affect profitability

Geopolitical and regulatory risk
- Resource nationalism
- Changes in tax and concession regimes
- Political instability in certain producing countries
- Challenges in the sector related to sustainability

Integration
The fund invests in a sector with potential high environmental and social impact.

- As an SFDR Article 8 fund, it promotes environmental and/or social characteristics.
- The fund integrates ESG factors (environmental, social, and governance) into the investment process, but does not have sustainability as its primary objective.
- The fund's PAI indicators (Principal Adverse Impact) measure the most significant negative impacts that investments can have on the environment, society, and governance (ESG).
- The fund does not invest in companies that violate DNB's Group Instruction on Responsible Investments.

Exclusions
The fund excludes, among others, companies that violate international norms and standards such as the UN Global Compact, and that do not demonstrate a willingness to change their practices.

The fund is intended as a thematic supplementary fund that can:
- Improve diversification
- Contribute as an inflation and geopolitical hedge
- Provide exposure to metal and material-based value chains that are important for industrial activity, infrastructure, and financial robustness.

Typically, the fund will function as:
- A smaller share in an equity portfolio
- Complement to global and regional equity funds

The fund may be suitable for investors who:
- Have a high risk tolerance
- Want diversification away from traditional equity indexes
- Have a long investment horizon
- Want exposure to commodities and real assets via the stock market

The fund is less suitable as a standalone main investment.