Al Chu

Al Chu is a portfolio manager at Man GLG, part of Man Group, an alpha-focused alternative investment manager listed out of the UK. Al leads the Natural Resources strategy from the New York office and has been investing in natural resources for over two decades. Before Man Group, he ran natural resources strategies at BNY Mellon and various hedge funds. On this episode of Behind the Ticker, Al joins Brad to talk about MGNR, the American Beacon GLG Natural Resources ETF, an actively managed equity approach to natural resources that looks nothing like your typical commodity ETF.

Not Your Typical Commodity Fund

MGNR is an actively managed equity fund, not a futures-based commodity product. That's a critical distinction. Most natural resources ETFs give you exposure to commodity prices through futures contracts, which come with roll costs and contango drag. Al's approach is fundamentally different: he's buying the stocks of companies that produce commodities. The thesis is that equity investors can capture commodity cycle upside while also benefiting from company-specific factors like management quality, balance sheet strength, operational leverage, and capital return policies.

The fund was launched in partnership with American Beacon, bringing Man Group's institutional natural resources research and portfolio management process to the ETF wrapper. This gives retail investors and advisors access to the same team and research that institutional clients have been using for years. Al tries to keep the portfolio focused on OECD countries with strong rule of law, keeping 80-90% of listings in the U.S., Canada, Australia, and Western Europe, with very little emerging market and no frontier market exposure.

The Commodity Cycle Approach and Minor League System

Al's process starts with identifying where you are in the commodity cycle. Different commodities move through cycles at different speeds, and the fund's positioning reflects which sub-sectors are in favorable parts of their cycle. From there, the team drills into specific companies, looking for stable earnings, strong balance sheets, and the ability to return capital to shareholders.

He uses a "minor league baseball" analogy for position building that Brad found particularly compelling. New ideas enter the portfolio as small positions, like prospects in a farm system. It's a pyramid structure: you build a lot of positions, and as data points accumulate to support the thesis, positions get promoted and grow larger. If the data turns against the idea, it gets cut. Al emphasizes that the discipline is data-driven: "Human sentiment, human emotions will lie to you, but the data doesn't." The process is designed to systematically add to winners and cut losers.

A key risk management technique is building baskets of exposure within a theme rather than making single-stock bets. If an earthquake hits a mining region, you don't want your entire thesis concentrated there. The basket approach isolates risks that can't be forecasted while capturing the broader commodity trend. If something bad happens to one position in the basket, the others in the same theme often benefit as supply tightens.

Current Positioning: Tankers, Coal, and Refiners

Al shared specific details about where the fund is positioned. About 15% is allocated to tankers, which Al calls a "picks and shovels" play. When crude oil prices are soft, the cost of shipping hydrocarbons becomes relatively more attractive, and tanker margins expand. He also notes there's no overbuild in the tanker fleet, which historically has been the factor that destroys tanker margins. Coal represents about 16% of the portfolio. While Australia and the UK are winding down their last coal plants, China has 300 brand new coal facilities on the books with 40-year operational lives. The developing world, Al argues, sees coal as the hydrocarbon of their future. Refiners also have a position because soft upstream costs mean healthier crack spreads.

Al doesn't dismiss the renewable transition, but makes the case that traditional energy has enormous remaining runway. The developing world's energy demand is growing and being met primarily by hydrocarbons. Natural resources equities are chronically under-allocated in most portfolios, partly driven by ESG mandates and partly by sector rotation into technology over the past decade.

Key Takeaways

• MGNR is an actively managed equity fund investing in natural resources companies, not a futures-based commodity product. It avoids the roll costs and contango drag of traditional commodity ETFs.
• Positions are built like a "minor league farm system": small initial positions that grow as data supports the thesis, with discipline to cut when data turns negative. "The data doesn't lie."
• Current positioning includes 15% in tankers (no fleet overbuild, attractive margins), 16% in coal (China building 300 new plants with 40-year lives), and refiners benefiting from favorable crack spreads.
• Al has over 20 years of natural resources investing experience across Man Group, BNY Mellon, and hedge funds. The ETF brings institutional-quality research to the ETF wrapper via American Beacon.
• The portfolio is 80-90% OECD countries with strong rule of law, focusing on liquidity and the ability to exit positions when the data says to get out.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.