The Guinness Global Energy Fund gives investors exposure to global energy markets. The Fund is managed for capital growth and invests in companies in the oil, natural gas, coal, alternative energy, nuclear and utilities sectors.
We believe that over the next twenty years the combined effects of population growth, developing world industrialisation and diminishing fossil fuel supplies will force energy prices higher. The Fund aims to benefit from this environment by investing in companies with energy resources, and in their service providers and distributors.
The Guinness energy team has been managing energy portfolios since 1998. They invest long-only and run a portfolio that comprises 30 equally weighted positions. Normally 90% of the Fund is invested in companies with a market capitalisation of over $1 billion.
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Guinness Global Energy Fund
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Guinness Global Energy Fund
In brief: why invest in energy?
- Energy demand
- Population growth and rising global wealth are driving relentless growth in the consumption of energy.
- Energy supply
- Despite improvements in alternative energy supplies, fossil fuels will remain the predominant world energy source for decades to come. However, the era of easily accessible, low-cost oil is over.
- Energy company profits
- Rising demand and depletion of low-cost energy supplies will push energy prices higher. This will create a favourable environment for companies with resource reserves, as well as their service providers and distributors.
- Energy & inflation
- Energy prices are a significant driver of inflation, which makes energy companies a useful long-term inflation hedge. If we see dollar inflation of 30-50% over the next decade (that’s just 2.7-4.3% per year), it will be surprising if oil and gas prices do not rise by a comparable percentage.
Energy investment case
“More motor vehicles will be sold over the next 20 years than have been sold in the entire history of the automobile industry.”
Surging demand for energy from developing countries
The world's population is growing at a rate of 1% per year, and is projected by the UN to rise by a further 20% (1.5 billion people) by 2030. Over 90% of this growth will come from developing countries. The implications for energy consumption are profound.
More motor vehicles will be sold over the next 20 years than have been sold throughout the entire history of the automobile industry. The surge of demand for electricity, cars and consumer goods in emerging markets will have a significant impact on the world's energy balance. China’s demand for oil per capita has not yet reached that of the OECD in 1950. There are 20 years of unrelenting oil demand growth to come as China’s vehicle fleet moves from 100 million now to 400 million by 2030, with numerous other countries following behind.
The rise in global energy demand is projected to continue long into the future. It is likely that the majority of this demand will be met by mainstream energy sources like oil, natural gas and coal.
The world’s oil consumption currently stands at around 94 million barrels per day, and continues to reach new highs each year. Even in the global recession of 2008/09, demand for oil from emerging markets continued to grow. We think that, over the next 10 years, global oil demand growth of 10-15 million barrels per day is highly plausible.
Supply is struggling to keep pace
High oil and natural gas prices between 2006 and 2014 incentivised energy companies to invest in new technologies, resulting in strong natural gas and oil production from unconventional shale resources in North America. This growth caused a change of production strategy from OPEC at the end of 2014, and this has led to sharply lower oil prices as OPEC grows production and defends market share while North American production starts to slow. We believe that OPEC is now producing near maximum capacity, while non-OPEC production will decline in the future as a result of lower investment levels. The industry still faces a big challenge in delivering reasonable oil supply growth at reasonable prices.
Favourable environment for investing in energy
The combination of growing demand and inadequate future supply signals that oil and other energy prices will move up over time. This would create a very favourable environment for companies with energy resources and for their service providers and distributors.
The Guinness Global Energy Fund seeks to capitalise on this energy price environment. We keep coming back to one key proposition: easily extractable oil and gas assets remain scarce, and it seems reasonable to believe that, as they get scarcer, they will trade at higher prices than we have yet seen. We believe shareholders in energy companies that are part of that world will be duly rewarded.
Tim Guinness is the founder and Chief Investment Officer of Guinness Asset Management and Guinness Atkinson Asset Management, our sister US business. He has over 35 years’ investment experience.
He founded Guinness Flight Global Asset Management Ltd in 1987 and was CEO (or joint CEO) from 1987 to 1999 and a portfolio manager of the Global Equity Fund. After Investec acquired Guinness Flight in 1998, he was Chairman of the company during the transition into Investec, as well as lead manager of the Investec Global Energy Fund.
In 2003 he left Investec to set up Guinness Asset Management, which was appointed the outsource manager of Investec Global Energy Fund.
Tim graduated from Cambridge University with a degree in engineering. He then completed a Master’s Degree in Management Science at the Sloan School M.I.T. in the United States.
Tim is co-manager of the Guinness Global Energy Fund and the Guinness Global Money Managers Fund.
Will joined Guinness Asset Management in May 2007, and is co-manager of Guinness Global Energy Fund and the Guinness Global Money Managers Fund.
Prior to joining Guinness, Will was employed by PricewaterhouseCoopers for six years, first in the London Middle Market Assurance Team, then as a valuation specialist in the Valuation & Strategy division. Will qualified as a Chartered Accountant in 2003 and graduated from the University of Cambridge with a Master’s Degree in Geography.
Jonathan joined Guinness Asset Management in September 2013 and is co-manager of Guinness Global Energy Fund.
Jonathan has 17 years’ experience in the energy sector. He was a Shell drilling engineer in the Dutch North Sea and worked as an energy consultant with Wood Mackenzie before becoming co-head of Goldman Sachs energy equity research in 2000. He joined Investec as co-manager on the Investec Global Energy Fund in 2008 where he helped grow the energy franchise at Investec to a peak of nearly $3.5bn in 2011. Jonathan then joined Mercuria in 2012 to build an equities and fund management business based around the provision of external funds before joining Guinness Asset Management in 2013.
Our stock selection is driven 50% by our top-down (macro) views and 50% by bottom-up stock analysis. The top-down views shape our energy sub-sector allocation, whilst bottom-up analysis is designed to identify the best stocks to populate our sub-sector allocation. The investment team applies a mixture of value and growth investing, with a bias towards value.
|Key energy equity sub-sectors|
|Integrateds||Exploration & production|
|Oil Services||Canadian oil sands|
|Refiners||Emerging market energy|
Rigorous independent analysis of the fundamental drivers of energy markets (e.g. oil supply and demand; OPEC behaviour; natural gas supply and demand; global LNG market; thermal and met coal markets). This allows us to forecast energy commodity prices and creates our top-down view, which in turn informs our energy sub-sector allocation.
|Guinness stock screening|
|Quality||Return on investment|
|Valuation||HOLT relative valuation|
|Earnings||Analysts’ earnings forecast revisions|
|Momentum||Price movements versus peers|
Bottom-up stock screening
The team operates a disciplined stock screening process. We review a universe of around 370 energy stocks each week to identify companies which look attractive on valuation, return on investment, earnings sentiment, and price momentum. Other screens specific to certain sub-sectors are also employed to generate ideas.
Stock due diligence
Stock ideas are taken from our screens and due diligence is performed to establish whether we have conviction to include the stock in our portfolio. The due diligence centres around detailed financial modelling.
The portfolio comprises 30 equally-weighted positions. Most of the positions comprise a single stock but a few are split across more than one stock, giving the portfolio 40-45 stocks in total. Our equally-weighted portfolio construction is designed create the best balance between maintaining fund concentration and managing stock-specific risk. It also imposes a structural sell discipline: an existing position must be sold to purchase a new holding.
The Fund does not follow any benchmark in its sub-sector weights. In particular, there are no underweight restrictions; the “super-major” oil and gas sector weighting may be zero.
Portfolio risk controls
Stock specific risk
Stock specific risk in the energy sector tends to be higher than the broader market. By constructing the Fund of 30 equally-weighted positions, we avoid significant exposure to any one individual stock.
Emerging market exposure
Normal practice is that emerging market exposure (considered by listing and by underlying asset exposure) is limited to 20% of the Fund.
The portfolio is liquid, with 90% of the Fund normally invested in companies with a market capitalisation over US $1 billion.
The Fund is not hedged from a currency perspective. However, because the underlying investments have an exposure to energy commodity prices, this tends to act as a natural hedge against currency movement.
|Fund||Global Energy Fund||Date (period end)||28.02.2017|
|Index||MSCI World Energy Index||Fund Launch||31.3.2008|
|Basis||Total return, in USD|
Please remember that past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise as a result of market and currency movement, and you may not get back the amount originally invested.
|Cumulative performance (USD, %)|
|E class (OCF: 1.24%)||Year-to-date||1 year||3 years||5 years||Team history (31.12.98) (1)|
|Annualised performance (USD, %)|
|E class (OCF: 1.24%)||1 year||3 years||5 years||10 years (1)||Team history (31.12.98) (1)|
|Calendar year performance (USD, %)|
|E class (OCF: 1.24%)||2012||2013||2014||2015||2016|
|Discrete year performance to date (USD, %)|
|E class (OCF: 1.24%) 12 months ending:||Feb-13||Feb-14||Feb-15||Feb-16||Feb-17|
Source: Bloomberg & Guinness Asset Management Ltd, bid to bid basis, total return.
Notes(1) Simulated (composite) past performance prior to 31.3.08, the launch date of this Fund. The Guinness Global Energy investment team has been running global energy funds in accordance with the same methodology continuously since November 1998. These returns are calculated using a composite of the Investec GSF Global Energy Fund class A from 31 December 1998 to 29 February 2008 (managed by the Guinness team until this date); the Guinness Atkinson Global Energy Fund (sister US mutual fund) from March 1 2008 to March 31 2008 (launch date of this Fund) and the Guinness Global Energy Fund class B since launch. Calculations by Guinness Asset Management Limited. All returns for periods starting after 02.09.08 are based on the Fund's E Class.
Guinness Global Energy Report
Energy equities as a good inflation hedge
The Guinness Global Energy team explains the case for energy equities as an inflation hedge
It’s about return on capital as much as it is about the oil priceThe Guinness Global Energy Team take a closer look at ROCE
OPEC announces first production cut in 8 yearsThe Guinness Global Energy Team assess OPEC’s recent agreement to cut production levels
Has OPEC just blinked?The Guinness Global Energy Team assess OPEC’s recent agreement to cut production levels
OPEC maintains market share strategy
The Guinness Global Energy Team assess the impact of OPEC’s decision to maintain their market share strategy at their December 2015 meeting.
Outlook for US oil production
The Guinness Global Energy Team provide a detailed update on how US oil production is being affected by lower oil prices and a few thoughts on how it could look at the end of 2015 and into 2016.
If it’s darkest before dawn, what time is it now?
Jonathan Waghorn puts a brutal summer for energy markets in its historical context, and analyses the future of the supply-demand mix.
VIDEO: Tim Guinness on the battered oil price
Tim Guinness reveals what is happening to the battered oil price, how long it will remain low and whether income investors should sell BP and Shell.
2015 Outlook for Energy
The Guinness Global Energy team give their thoughts on the prospects for the energy sector amid falling oil prices.
The Guinness Global Energy team give their assessment of OPEC’s decision not to cut production, and what it means for oil prices and energy equities.
FE Trustnet | Mar '16
Prospects for oil
Oil has rallied recently and Jonathan Waghorn and Will Riley, managers of the Guinness Global Energy fund, argue it could recover further from here.
Investment Week | Feb '16
Iranian oil and oil price volatility
Jonathan Waghorn, Guinness Global Energy co-manager, warns that Iran’s entry to the oil market could delay the rebalancing of global oversupply, but rebalancing is coming nonetheless.
Investment Week | Oct '15
When will oil prices rebound?
In a Q&A with Investment Week, Guinness Global Energy co-manager Jonathan Waghorn explains why a supply/demand convergence is on the horizon.
Morningstar | Jan '15
Fund in focus: “An outstanding team”
“A highly experienced management team and prudent portfolio construction continue to make the Guinness Global Energy fund a strong choice for investors seeking exposure to the energy sector.”
Citywire | Dec '14
Stock picks amid oil price slump
Jonathan Waghorn picks out the stocks he is backing as oil prices fall to their lowest level in five years.
Investment Week | Sep '14
How ‘cheap and struggling’ oil majors can bounce back
Investment Week question manager Will Riley on the rally in energy equities.
Investment Week | Aug '14
Investment Week – What’s behind the turnaround in energy
Jonathan Waghorn says energy equities have underperformed for three years, and now could be an interesting entry point.
TRUSTNET | Jun '14
Funds to access the value in Energy
Trustnet’s John MacMahon identifies Guinness Global Energy as a top fund for accessing the value in Energy equities.
CNBC | Jun '14
Video: Is crude oil heading to $150?
Jonathan Waghorn discusses crude oil markets and portfolio holdings on CNBC.
The Daily Telegraph | Dec '13
VIDEO: “Oil stocks will outperform the FTSE 100”
Talking with The Daily Telegraph, Tim Guinness says stock prices are lagging the oil spot price – but they will catch up.
Investment Compass | Jun '13
VIDEO: Is now the time for Energy?
Tim Guinness talks with Investment Compass and considers why now might be a good time to consider investing in energy stocks.
Fund Strategy | Apr '13
Energy offers solid inflation hedge
Will Riley in Fund Strategy says the future for energy equities looks exciting as many are cheap and overlooked
|For information on the Fund’s current investments, please see the latest fact sheet:||English||French||German||Italian|
|Tim Guinness (31/03/2008)
Will Riley (01/01/2010)
Jonathan Waghorn (09/09/2013)
|Benchmark||MSCI World Energy Index|
|IA sector||IA Global|
|Redemption fee||2% within 30 days of purchase|
|Underlying currency||US Dollar|
|Valuation||2300 Dublin time|
|Deal cut off time||1500 Dublin time|
|Year end||31 December|
|Administrator||Capita Financial Administrators (Ireland) Ltd|
|Custodian||JP Morgan Bank (Ireland) plc|
|UK Reporting Fund status||Yes|
|1.24% OCF||1.49% OCF||1.99% OCF|
|Accumulation or Distribution||Acc||Acc||Acc||Acc||Acc||Acc||Acc|
|Name||E||X||A||D||B||C||C EUR Acc|
(total ongoing charges p.a.)
|Minimum direct investment||$10,000,000||£5,000,000||$200,000||€ 100,000||$1,000||£1,000||€ 1,000|
|Minimum platform investment||Guinness Asset Management minimums do not apply. Platforms apply their own minimum investment levels.|
|Bloomberg ticker||GUINGEE ID||GUINGEX ID||GUINGEA ID||GUINGED ID||GUINGEB ID||GUINGEC ID||GUINCEU ID|
|Country registrations||UK, CH, FIN, FR, LUX, SGP (all classes); GER (A, B, D & E classes).|
- United Kingdom
- Singapore (professional only)