THE BEST WAY TO PARTICIPATE IN THE CLEAN ENERGY INVESTMENT THEME
Oil prices have dropped 60% since the peak in June. While the fall was welcomed at the beginning, it became a source of concern with the financial crisis. While the consensus thought the worst was over in the long ascent for oil prices, we believe this was only a momentary pullback. In fact, we believe the credit crisis and deleveraging process has affected hedge fund strategies forcing many positions to be closed at any price. This has pushed commodity and energy prices beyond the theoretical price normally associated with a recession scenario. Major exporting countries have production, consumption and export trade off problems with the net export factor being one of the most significant.
Europe, the USA and Asia have to continue to deploy resources to find additional sources of energy and reduce growing import dependency. There is no clash yet, but the pressure is present between exporters and importers. While the oil price was plunging, clean energy companies were dropping even more (S&P Global Clean Energy Index -73%). Against that background, the US presidential election has provided a new direction as to how America should solve its dependency on oil. This will be a powerful theme in financial markets as more capital will be allocated to alternative energy supply infrastructure. We believe the Clean Energy Industry will be a massive investment theme. The recent drop in Clean Energy stock prices is not deserved and provides great opportunities.
BBGI Group has created a Clean Energy Index and an investment fund (The BBGI Clean Energy 100 Index and the BBGI Share Clean Energy fund) that offer investors an easy access to a diversification of companies with clean energy businesses. They both focus on companies in the clean energy industry that participate in the generational change in the way energy is produced, transformed and stored, seeking to capture the performance of companies that contribute to the development of sub industries within the alternative energy group.
It is composed of companies which develop innovative technological processes in the production, transmission, and storage of energy in different sectors (Solar; Wind; Biofuels; Energy Efficiency, Power Storage, Hydrogen & Fuel Cells). Companies included in the Index/Fund should have a significant exposure to activities that are connected to alternative energy; a substantial R&D spending component and a good potential to contribute to the growth of this industry. The market is not concentrated and actual players or the winners of tomorrow have a wide range of market capitalization size. Hence, size does not matter in the inclusion process, but the minimum average market capitalization is at a USD 400 million level. Stocks also have to be traded on regulated international Stock Exchanges on a daily basis.
Over the decade, the clean energy theme has greatly evolved. Worldwide companies have developed activities in the clean energy field leading to the globalization of participants and to further quality candidates. The Index/Fund are constructed to reflect the wealth of this industry and have a broad international diversification with a similar weighting in 3 major regions (Americas, Europe and Asia). It also has a wide diversified currency allocation. The broad investment focus covers 3 major segments with a higher exposure in the Solar industry. It is composed of 100 companies with an equal weight (1% weight). This gives smaller companies a higher relative importance in the Index/Fund reflecting their higher commitment and dependency to the future of clean energy.
The BBGI Clean Energy 100 Index has massively outperformed both the MSCI World Index and the Energy Index. The Clean Energy segment of world equity markets has benefited greatly from the rise in energy prices and from all new developments to find alternative sources of energy. Other existing indices covering this segment have also outperformed the MSCI World Index, but the BBGI Clean Energy 100 Index clearly leads the ranking with a +33.84% annual performance. It clearly is the best way to participate in the long term trend at a current very low entry level.
