INVESTORS looking for diversification from mainstream energy equity funds that typically contain significant exposure to the oil and gas giants could follow the lead given by institutional investors and look at the BlackRock New Energy Investment Trust.
Launched in October 2000, the trust invests globally in order to generate long-term capital growth from stakes in companies which focus on alternative energy or energy technology.
The trust is managed by Poppy Allonby and Robin Batchelor, who als
o manage the open-ended version of this fund.
At 33 per cent of the trust's assets, the largest single geographic exposure is to the USA, although Allonby pointed out that "we don't segment on a geographic basis, but we do use a top-down approach to take account of the sectors we believe will deliver the best returns".
Currently over 40 per cent of the £170 million trust is invested in wind-related companies. "We have gradually reduced our exposure to companies involved in solar power and added to companies like Vestas Wind Systems, a Danish wind turbine manufacturer," said Allonby. "The EU is targeting 20 per cent of total energy production from renewables by the year 2020. Individual states in the US have similar targets, and wind energy is a very cost effective way of achieving this. We have also taken stakes in companies that supply parts for the wind turbine industry as these should also benefit from the growth in the sector."
Regardless of which party triumphs in the US election, there will be strong political backing for renewable energy. The trust is well placed to capitalise from such a tailwind.
However, not all the holdings in the portfolio are directly energy related. The trust has also enjoyed healthy returns from its investment in a company producing potash fertiliser due to the strong demand for biofuels.
The performance of the share price over the past five years has rewarded long-term investors, with a return of 233.7 per cent comparing favourably with the increase in the FTSE World index of 53.1 per cent. Potential investors should be aware that the trust can hold up to 25 per cent of its assets in unquoted companies and that this increases the potential risks due to the illiquid nature of these companies.
For more information on the trust, which is available via a savings plan or an Isa, call 0800 445522 or visit www.blackrock.co.uk/its
• Barry O'Neill is a chartered financial planner with Thomson Shepherd Limited (incorporating Coggans Wood).
