Guinness
Sustainable Energy Fund

• In brief: why invest in sustainable energy?
• Why invest in the Guinness Sustainable Energy Fund
• Fund managers
• Investment process
• Portfolio construction & risk controls

In brief: why invest in sustainable energy?

Demand growth

The electrification of transportation and improved energy storage economics brings attractive long term sustainable energy demand growth

Improving Economics

Both governments and companies are pursuing sustainable energy in order to achieve mandated carbon targets or to improve public perception

Public & Private Support

Both governments and companies are pursuing sustainable energy in order to achieve mandated carbon targets or to improve public perception

Low current exposure

Poor profitability and need for subsidies has kept the weight of sustainable energy in global indices and broad global equity funds at a low level

Sustainability Theme

The sustainable energy sector offers ‘green’ credentials that some investors are targeting to help facilitate global de-carbonisation and to reduce carbon intensity of their portfolios

Why invest in the Guinness Sustainable Energy Fund?

1. Concentrated Exposure

   The Guinness Sustainable Energy fund aims to deliver investment returns via equal weighted, concentrated exposure to 30 sustainable energy companies; available in a daily traded UCITS structure

2. Specialist Team

   The Guinness Energy Team has 20 years of experience of running energy investment strategies in a consistent manner and providing insight for investors into the energy markets

3. Investment Process

   The Fund is run using a Top Down and Bottom Up investment process based on an internally created Universe of 179 Sustainable Energy companies with detailed valuation models

4. Valuation Opportunity

   The fund selects the most attractive equities in the Universe and it displays growth together with higher return on capital, lower valuation multiple and stronger balance sheets than the MSCI World Index

5. Sustainability Theme

   The Guinness Sustainable Energy Fund offers ‘green’ credentials that some investors might use to help facilitate global de-carbonisation and to reduce carbon intensity of their own investment portfolios

Fund Manager

Will Riley

Will joined Guinness Asset Management in May 2007, and is co-manager of Guinness Global Energy Fund, Guinness Sustainable 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 Waghorn

Jonathan joined Guinness Asset Management in September 2013 and is co-manager of Guinness Global Energy Fund and the Guinness Sustainable Energy Fund.

Jonathan has 20 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.

Investment process

Our stock selection is driven 50% by our top-down 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.

Top-down views

We conduct rigorous independent analysis of the fundamental drivers of sustainable energy markets: energy commodity prices; sustainable energy technology research and development; installation and equipment prices; political and economic support for the sector; government and private sector demand. This allows us to analyse likely demand for sustainable energy equipment and services and creates our top-down view, which in turn informs our industry energy sub-sector allocation. Analysis of the key drivers of growth, scarcity, barriers to entry and economics informs our weighting to our internally generated Sustainable Energy subsectors

Guinness stock screening
Quality	Return on investment
Valuation	Relative to peer group and history
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 179 sustainable energy stocks each week to identify companies which look attractive on their return on investment, valuation, earnings sentiment and price momentum. Other sub-sector specific screens are also employed to generate ideas.

Stock due diligence

Stock ideas are taken from our screens. We then conduct due diligence to establish whether we have conviction to include the stock in our portfolio. The due diligence centres around detailed financial modelling.

Portfolio construction

Equally-weighted portfolio

The portfolio comprises around 30 equally-weighted positions. Our equally-weighted portfolio construction is designed to create a 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.

Sector weights

There is no benchmark adherence in the Fund’s sub-sector weights.

Portfolio risk controls

Stock specific risk

Stock specific risk in the sustainable 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

There are no limits to emerging market exposure.

Liquidity

The portfolio is liquid, with 90% of the Fund normally invested in companies with a market capitalisation over US $500 million.

Currency

The Fund is not hedged from a currency perspective.

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.