Agefi Luxembourg - mai 2026

Mai 2026 3 AGEFI Luxembourg Économie & Banques Continued page 1 Their historically low correlation with tradi­ tional financial assets makes them a valuable addition to portfolios, particularly in periods of market stress or inflationary pressure. WhyEnergy andCommodities Companies: ASector Reinvented While commodity prices are a key driver of their returns, the evo­ lution within the companies in the sector themselves is equally important. Thesector is undergoing a fundamental transformation in governance and capital allocation. The era of em­ pirebuildingandexcessivecapitalex­ penditureisgivingwaytoamoredisciplined approach.Management teams areprioritizing share­ holderreturnsovervolumegrowth,focusingonprof­ itability, free cashflowgeneration, anddistributions. This shift is gradually changing how the market perceives the sector. Energy andmining companies are increasingly seen less as volatile, capitalinten­ sive “oldeconomy” businesses, andmore as critical enablers of the energy transition. This recharacteri­ zation is slowbut important, as it opens the door to a valuation rerating. Moreover, the sector is evolv­ ing into a capital return story.With limited reinvest­ ment opportunities and stronger balance sheets, companies are returninga larger shareof cashflows to shareholders through dividends and buybacks. This provides a more predictable and attractive re­ turn profile than in the past. Improved discipline also reduces the riskof valuedestruction, enhancing investor confidence and supporting higher valua­ tionmultiples over time. ReturnDrivers: Commodity Prices, ReRating and Capital Returns The investment case for energy and commodity producers rests on three primary drivers. First, commodityprices remaincentral. Supply con­ straints combined with structural demand growth create a favourablepricingenvironment. Evenmod­ est price increases can have a significant impact on profitability due to operating leverage. Second, valuation reratingoffers additional upside. As governance improves and the sector’s strategic importance becomes more widely recognized, in­ vestors may assign higher multiples to these com­ panies. The transition from a “cyclical trade” to a “structural allocation” is key. Third, dividends and share buybacks are becoming increasingly important. Strong free cash flow gen­ eration enables companies to deliver attractive and often growing income streams, contributingmean­ ingfully to total returns. Risks: Cyclicality and Execution Challenges Despite its structural appeal, the sector is not without risks. Macroeconomic conditions remain an important influence. Global growth slowdowns or rising in­ terest rates can dampen demand for commodities, leading to price volatility. While supply con­ straints provide support, they do not eliminate cyclical fluctuations. Cost inflation is another concern. Rising input costs such as labour, energy, and equipment can com­ pressmargins, particularly if commodity prices do not increase proportionally. Political and regulatory risks are inherent. Resource nationalism, changes in taxation, environmental regulations, and permitting challenges can impact project economics and operational stability. Capital allocation remains a key risk factor. While discipline has improved, there is always the poten­ tial for missteps, particularly during periods of strong commodity prices when incentives to ex­ pand can reemerge. Operational risks must also be considered. Acci­ dents, environmental incidents, and project delays canhave significant financial and reputational con­ sequences. Portfolio Implications: Rethinking the Traditional Allocation For decades, the classic 60/40 equitybondallocation has been the default setting for a balance fund. It worked inanenvironment of disinflation, falling in­ terest rates, and stable correlations, where bonds provided both income and diversification. That environment is now changing. In a world of structurally higher inflation, greater geopolitical tension, andfinancial repression, government bonds no longer provide the same level of protection. At the same time, real assets such as precious metals or com­ modities take on a different role. Amore resilient portfolio may tilt toward a structure such as: 70% equities 20%precious metals 10% energy and commodities In such a structure, preciousmetals provide a hedge against monetary instability and currency debasement. Energy and commodities offer direct exposure to supply constraints, infla­ tion, and real asset scarcity. Together, they introduce sources of return that are less dependent on financial conditions and more anchored in physical realities. This is not about abandoning diversification—it is about up­ dating it for a different regime. It also means ac­ cepting a higher degree of volatility. Selectivity andQualityMatter Within the sector, a selective, bottomup approach remains essential. The focus should be on companies with high­ quality, longlife assets capable of generating sustainable returns across cycles. Lowcost pro­ ducers are particularly attractive, as they are bet­ ter positioned to remain profitable even in weaker pricing environments. Balance sheet strength is equally important. Conservative leverage provides resilience dur­ ing downturns and flexibility to capitalize on op­ portunities. Capital allocation discipline should remain central. Companies that demonstrate a consistent commit­ ment to shareholder returns and prudent invest­ ment aremore likely to deliver longtermvalue. Cost structure, geopolitical exposure, and align­ ment with structural demand trends—particularly those linked to the energy transition—should also guide portfolio construction. Conclusion The energy and commodities sector is emerging from a prolonged period of underinvestment and repositioning itself as a structurally attractive investment opportunity. Supply constraints, rising strategic importance, and the demands of the ener­ gy transition create a supportive backdrop for sus­ tained value creation. At the same time, improved governance and capital discipline are reshaping the sector’s return profile, shifting it toward amore balanced combination of growth, income, and re­ rating potential. For years, capital allocation in the sector was dominated by “growth at any price,” often resulting in poor returns and balance sheet stress. That paradigm has shifted. Today,energyandminingcompaniesareincreasingly focusedondiscipline, shareholder returns, andoper­ ationalefficiency.Whilerisksremain—particularlyin relation to macroeconomic conditions and execu­ tion—the structural nature of these trends suggests thatenergyandcommoditiescanplayavaluableand increasinglynecessary role in a diversifiedportfolio. GuyWAGNER, CIO, BLI Banque de Luxembourg Investments Energy and Commodities: FromUnderinvestment to Structural Opportunity BanquedeLuxembourg,sociétéanonyme–14,boulevardRoyal–L-2449Luxembourg–R.C.S.B5310 For over 40 years Banque de Luxembourg Asset Servicing has been helping initiators to set up their investment funds in Luxembourg. Our specialist teams are ready to assist you with tailor-made services, expertise and unwavering support. Supporting fund initiators since 1983