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Institutional investors: Markets mix well with chemicals

1:58 PM MST | December 20, 2013 | —Vincent Valk

For a third consecutive year, The Capital Group (Los Angeles) tops CW’s ranking of the chemical industry’s top institutional investors, with Fidelity (Boston) and T. Rowe Price (Baltimore) rounding out the top three. The ranking evaluates the top three active shareholders at publicly traded chemical companies with a market capitalization higher than $5 billion, according to the CW75 as of 25 November. Capital Group controls 14 such stakes at chemical makers, worth a total of about $25.7 billion.

While Capital Group has retained the same number of top stakes from one year ago, the value of its holdings has declined 9.5% from the 2012 list. However, the values of other money-management firms’ large chemical stakes, including Fidelity, T. Rowe Price, and MFS Investment (Boston)—the next three firms at the top of the list—have increased. The value of Fidelity’s holdings rose 31.1%, to $11.8 billion, while the firm held 16 top stakes compared with 12 last year. T. Rowe Price held the same six stakes, but their value rose 20.3%, to $8.06 billion, and MFS’s seven stakes rose 39.8%, to $8.05 billion.

Beyond the top firms, some newcomers have risen during 2013. The most notable of these is Franklin Templeton (San Mateo, CA), which barely registered among the industry’s leading investors last year. The firm has $4.4 billion under management spread across five top chemical industry stakes. Len Blavatnik’s Access Industries’ 15.7% stake in LyondellBasell Industries, which is worth $6.1 billion, also figures on the leaderboard this year. Other new firms include Credit Suisse and Cascade Investment. The latter manages funds for tech billionaire Bill Gates and holds a 9.27% stake in Ecolab, valued at $2.76 billion.

Some firms have fallen in the ranking. The value of Dodge & Cox’s (San Francisco) top chemical industry stakes declined 67.7% from 2012, to $1.08 billion, as the firm fell from the top 10 for the first time. Norges Bank’s top stakes declined in value by 21%, to $3.09 billion, while the firm’s number of top stakes fell from seven to four. Norges Bank, the world’s largest sovereign-wealth fund, manages the Norwegian government’s pension fund. The bank had fewer large chemical industry investments for the second consecutive year.

CW’s industry investor ranking includes institutional investors, such as The Capital Group and Fidelity, as well as private equity firms, hedge funds, insurance companies, and sovereign wealth funds. The ranking includes only active investors, who make daily decisions about the composition of their portfolios. It excludes index funds, which are automatically weighted to mirror the composition of overall market indices, such as the S&P500.

Chemical industry stocks have generally performed well in 2013. The CW 75 rose 15.9% for the year to 3 December. Overall market indices have also performed well this year, although their gains were generally smaller. The Dow Jones Industrial Average rose 22.8% for the year to 30 November, while the S&P500 rose 26.6% during the same period. Markets were also mostly less volatile this year than during 2012.

Fidelity’s Select Chemicals Portfolio, a mutual fund consisting mostly of chemicals stocks, rose 31.1% during the same time frame after rising 15.6% during 2012. The US shale gas boom has driven many of the fund’s investments, according to Fidelity portfolio manager Mahmoud Sharaf. The fund’s largest holding is a $114-million position in LyondellBasell, which is primarily an effort to capitalize on the US feedstock advantage, Sharaf says. The fund also holds positions in other US companies with large commodity chemicals operations, including Eastman Chemical, DuPont, Celanese, Huntsman, Axiall, and Dow Chemical. During the six months to 31 August, the fund significantly increased the size of its stake in LyondellBasell.

In addition to the Chemicals Select Portfolio, Fidelity maintains a materials portfolio, which invests in chemicals as well as mining, packaging, and paper companies. The fund recently upped its chemicals investments; 9 of its top 10 holdings as of 31 October were in companies listed in the CW75. The fund’s largest holding as of 31 October was a $179.2-million stake in Monsanto, and its second-largest holding was a $109.3-million stake in LyondellBasell. The fund also holds large stakes in Praxair, FMC, Ecolab, Eastman, and PPG. During 2012, the fund increased its exposure to commodity chemicals firms with business tied to the construction sector, says Fidelity portfolio manager Tobias Welo.

Capital Group’s investments in chemicals are spread across a variety of mutual funds. Fundamental Investors, a long-term growth and income fund, invested 4.1% of its holdings in chemicals as of 30 September, the most recently available data. The fund held large stakes in Dow, DuPont, FMC, LyondellBasell, and Praxair. Dow is the 10th-largest holding in American Mutual Fund, a Capital Group fund with a slightly more conservative philosophy than Fundamental Investors. Some 3.9% of the fund’s holdings are in chemicals, and it holds large positions in Air Products, 3M, DuPont, IFF, MeadwestVaco, and Praxair, in addition to Dow.

Leading stakeholders*
(in millions of dollars)
Investor Stake value # of stakes
Capital Group $25,655 14
Fidelity 11,760 16
T. Rowe Price 8,062 6
MFS Investment 8,047 7
AI International Chemicals 6,111 1
State Farm Insurance 4,451 4
Franklin Templeton 4,398 5
Credit Suisse 3,861 2
Norges Bank 3,091 3
Cascade Investment 2,757 1
*Active investors withe the highest value of top stakes at leading chemical firms. Sources: Thomson Reuters (New York); CW research.
Institutional interest*
(values in millions of dollars)
Company/investors % stake Value
Bayer
Capital Group 6.48% $6,316
UBS Global Asset Management 2.65 2,282
Credit Suisse Asset Management 2.49 2,222
BASF
Norges Bank Investment 3.02 2,474
DWS Investment 1.35 1,291
Union Investment 1.01 811
3M
MFS Investment 2.99 2,404
State Farm Insurance 1.65 1,329
T. Rowe Price 1.60 1,289
Monsanto
Fidelity Management & Research 5.26 2,925
Jennison Associates 2.73 1,521
Primecap Management 2.28 1,270
DuPont
Capital Group 3.79 2,048
Bank of America Merill Lynch 2.70 1,463
Franklin Advisers 1.43 776
Dow Chemical
Capital Group 12.83 5,975
Wellington Management 3.68 1,714
Franklin Advisers 2.79 1,299
LyondellBasell Industries
AI International Chemicals 15.68 6,111
Fidelity Management & Research 5.33 2,212
Franklin Advisers 2.82 1,173
Air Liquide
Thornberg Investment Management 1.48 642
MFS Investment Management 0.89 384
Northern Cross 0.75 326
Praxair
T. Rowe Price 4.63 1,639
Capital Group 7.54 2,667
MFS Investment Management 3.36 1,188
Syngenta
Capital Group 4.98 1,822
BlackRock Investment Management 4.97 1,805
BNY Mellon Asset Management 4.57 1,658
Linde
MFS Investment Management 5.11 1,880
Credit Suisse Asset Management 4.46 1,639
Capital Group 4.25 1,356
Sasol
Allan Gray 8.62 2,455
Industrial Development Corp. of South Africa 8.20 2,546
Coronation Fund Managers 3.63 1,034
Ecolab
Cascade Investment 9.27 2,757
T. Rowe Price 6.02 1,790
Fidelity Management & Research 3.72 1,106
Potash Corp. of Saksatchewan
Capital Group 4.02 1,086
Fiduciary Management 3.09 835
RBC Global Asset Management 2.31 625
PPG Industries
Heights Capital Management 4.77 960
MFS Investment Management 4.53 1,075
Fidelity Management & Research 3.04 722
Shin-Etsu Chemical
Nippon Life Insurance 5.53% $1,461
Sumitomo Mitsui Trust Bank 5.13 1,282
Aberdeen Asset Management 4.96 1,309
Air Products
Pershing Square 9.80 2,190
State Farm Insurance 7.34 1,640
Davis Selected Advisers 3.43 766
Mosaic
Temasek Holdings 6.53 835
RS Investments 3.78 483
Global Thematic Partners 2.69 344
Sherwin-Williams
T. Rowe Price 8.41 1,552
J.P. Morgan Asset Management 4.04 745
Fidelity Management & Research 2.47 455
AkzoNobel
Harris Associates 4.85 845
MFS Investment Management 4.18 610
Causeway Capital Management 4.18 610
Royal DSM
Capital Group 6.45 919
UBS Global Asset Management 3.00 432
M&G Investment Management 2.53 323
Agrium
Franklin Advisers 6.13 755
RBC Global Asset Management 2.75 339
Jana Partners 2.74 339
Solvay
J.P. Morgan Asset Management 3.03 371
Norges Bank Investment 1.96 240
M&G Investment Management 1.91 219
Yara Internatonal
Folketrygdfondet 6.07 709
Fidelity Management & Research 1.74 209
SEB Asset Management 1.13 137
Eastman Chemical
Fidelity Management & Research 9.28 1,112
Iridian Asset Management 3.87 465
Viking Global Investors 3.76 451
Sigma-Aldrich
State Farm Insurance 11.73 1,197
Walter Scott & Partners 4.79 489
Capital Group 3.50 357
FMC
Capital Group 11.36 1,086
Fidelity Management & Research 8.08 772
Cramer Rosenthal McGlynn 4.06 388
Church & Dwight
Neuberger Berman 6.23 518
Jennison Associates 1.87 156
Goldman Sachs Asset Management 1.68 140
Celanese
T. Rowe Price 13.01 1,096
Capital Group 12.25 1,032
Dodge & Cox 10.14 854
Airgas
Fidelity Management & Research 6.78 528
J.P. Morgan Asset Management 3.54 276
Threadneedle Asset Management 3.53 275
Westlake Chemical
Royce & Associates 3.35% $234
Dimensional Fund Advisors 1.53 107
Federated Equity Management Co. of Pennsylvania 1.11 77
IFF
MFS Investment Management 7.52 506
Capital Group 6.59 443
State Farm Insurance 4.24 285
Braskem
Dimensional Fund Advisors 0.87 24
Western Asset Management Co. 0.72 22
Fidelity Management & Research 0.72 22
Ashland
Jana Partners 8.62 617
Pyramis Global Advisors 6.00 429
Fidelity Management & Research 5.84 417
W.R. Grace
Iridian Asset Management 6.96 467
Blue Ridge Capital 3.90 262
Fidelity Management & Research 3.46 233
Arkema
Edmond de Rothschild Asset Management 6.06 432
Norges Bank Investment 5.39 377
Fidelity Management & Research 5.35 384
Valspar
US Bancorp Asset Management 6.63 364
Iridian Asset Management 5.38 296
Capital Group 4.48 246
Methanex
M&G Investment Management 8.08 396
Wellington Management 7.30 358
Fidelity Management & Research 6.21 305
Sumitomo Chemical
Sumitomo Mitsui Trust Bank 4.91 256
Sumitomo Life Insurance 4.29 270
Nippon Life Insurance 3.10 195
Lanxess
BlackRock International 9.61 500
Dodge & Cox 4.14 223
Fidelity 2.95 158
Albemarle
Franklin Advisory Services 7.72 395
J.P. Morgan Asset Management 6.32 324
The London Company 6.30 323
Huntsman
Soroban Capital Partners 4.43 221
LSV Asset Management 4.36 217
Senator Investment Group 3.94 196
RPM International
Capital Group 6.27 302
Fidelity Management & Research 4.16 200
Neuberger Berman 2.10 101
Rockwood Holdings
T. Rowe Price 14.24 696
Iridian Asset Management 5.39 263
Orbis Investment Management 4.97 243
*Top investors in chemical companies with market caps greater than $5 billion. Sources: Thomson Reuters (New York); CW research.












 
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