First State Global Resources fund manager Joanne Warner says bottom-up factors are the key to her decision to own certain stocks, despite the influence of China on global commodity prices. Warner says China has rapidly pushed up the price of iron ore. However, she does not seek to predict commodity prices because she believes forecasting production is unreliable, but says she would dump Brazilian mining company CVRD, a large producer of iron ore, if it did not meet certain tests. She says the macroeconomic argument for owning iron ore – a material that China does not own but needs for the steel production that underpins its industrial expansion – is “hit-on-the-head obvious”. However, it is not the deciding factor: “The thing that makes CVRD particularly attractive is its growth profile. Over the past four years, it has grown by about 40-50%. This is through owning small iron ore producers in Brazil.” The Sydney-based fund manager invests right across the spectrum of resource companies, from global firms such as Rio Tinto, BHP Billiton and aluminium producer Alcoa down to the smaller exploration stocks. The top 10 holdings made up about 45% of the fund at the beginning of December. The majority of the £29m portfolio is in established companies. At the smaller end of the spectrum, Warner invests in projects at an early stage when you get “the most uplift”. The fund manager says: “For the best investments you ever make, you can do the calculations on the back of a beer mat.” She works as part of a team of four under head of global resources David Whitten at Colonial First State, a sister company of First State Investments. Whitten is a trained geologist, while Warner has a doctorate in chemistry. Emphasis is placed on site visits and the fund manager says her team visits, on average, 76 sites a year. She says these trips, together with the team’s background, allow for an “informed view” to be taken. Resources are an under-researched area of the market; cost-cutting has resulted in teams being slimmed down with, Warner estimates, half as many people covering the sector as five years ago. The fund, which was launched last October, holds between 25 and 75 stocks invested across the globe. Currently, the team runs three other funds, including Colonial’s Australian-domiciled £277m Wholesale Global Resources fund.