Guinness Asset Management Targets Wealth Managers With Alternative Energy Fund

Emma Rees

12 December 2007

Specialist energy fund manager, Guinness Asset Management, launched a new alternative energy fund at a breakfast briefing in London yesterday. Targeted at self-directed UK investors and wealth managers, the Guinness Alternative Energy Fund clones a fund launched by Guinness’s sister company in the US that has attracted $150 million investment to date and returned 40.80 per cent in 2007. The new Dublin based fund will be a fully authorised retail fund for UK and European investors. Subject to regulatory approval the fund will launch at the end of 2007 or at the start of 2008. The fund’s lead manager, Tim Guinness, told WealthBriefing that whilst fossil fuel supplies were not at peak production yet, they were “frighteningly close” to approaching exhaustion: “China’s coal production has doubled from 1 billion tonnes to 2 billion tonnes a year and reserves are expected to last only 40-50 years at this rate. Climate change worries and a desire for energy security create strong pressures to develop non-conventional sources of energy and ensure that we have a positive government policy backdrop.” Mr Guinness said that the launch was particularly timely in 2007 due to high energy prices of both oil, which he anticipates spiking at $150 a barrel in years to come, and continually rising electricity costs: “Today’s high energy prices are providing economic support to the alternative energy sector. The scale of the challenge moving from fossil fuels makes this an attractive area for long term investment. This industry could sustain growth rates of over 20 per cent per annum for more than 20 years.” The fund, which invests in listed equities, seeks to invest in “companies with real revenues and real profits” and allocates only 5-10 per cent of funds to early stage research companies. Mr Guinness told WealthBriefing that one of the challenges when setting up the US fund in 2005 was whether there was an investable universe from which to structure the fund: “We wanted a fund that didn’t cheat, so the companies in the fund will normally invest at least 50 per cent of their business in these areas and have market capitalisations of over $100 million.” Twenty-five per cent of the fund’s universe of companies is in North America and 51.1 per cent in Europe . Seventy-five per cent of the fund’s sector weighting is in solar , wind and hydro . The remainder is invested in a range of areas such as geothermal, fuelcell, biofuels and wave and tidal power. Mr Guinness explained the interesting diversification achieved by investing in different alternative energy sources. Wind, for example, is an increasingly mature source of renewable energy which has nearly got to “grid parity” i.e. the same cost as traditional energy sources. Solar is relatively immature with high prices relative to traditional energy and provides only 0.1 per cent of the world’s electricity currently: “We are positive on the long-term outlook for solar stocks as the growth potential here is highest. It will of course be vital that the solar industry brings costs down so that solar is economic without subsidies”, said Matthew Page, one of the co-managers of the fund along with Tim Guinness and Edward Guinness. The fund will follow a low load pricing structure with investments of over £50,000 attracting no initial charge, annual management charges of between 1 and 1.5 per cent and expenses capped at 0.5 per cent. The launch marks the first of a roll out of a stable of specialist sector and thematic funds by Guinness Asset Management across all of the asset classes they manage including energy, Asia and innovation.