There is no denying the political pull of green. Tax credits for renewable electricty projects, efficient car incentives, building efficiency stimulus, renewable portfolio standards, fuel blending requirements and associated protective tariffs, smart grid funding, and favorable net metering are in place seeking to accelerate the adoption of clean energy.
But clean energy is really just another way of doing what people are already doing with energy. Since price matters (it really really does…remember $4 gas?), and clean energy can be expensive, the incentives are policy tools to try to induce people to do the right thing. So how is this translating into the world of publicly traded clean energy companies?
First, investors can research and buy individual companies. I track 335 companies that have significant exposure to clean energy. Of the 335, about 200 are large enough (ie market cap greater than USD 50 million) and are traded on reasonably accessible exchanges to be candidates for individual investors.
Clean energy investors also now have 16 fund choices in the US. I view these vehicles in three heaps: ETFs that track broad based clean energy investmetns, ETF “verticals” that track specific clean energy technologies/strategies, and actively managed mutual funds that invest in clean energy. I’ve taken a bit of time and summarized these investments broken out this way. I have also shown their year-to-date returns (10/5/2010) ex dividends so I can compare them with other alternative investments.
The six broad based ETFs are:
|
name |
ticker |
mar_cap (million USD) |
expense (%) |
dividend (%) |
YTD (%) |
|
Powershares WilderHill Clean Energy Portfolio |
PBW |
562.4 |
0.7 |
N.A. |
-10.54 |
|
Powershares Global Clean Energy Portfolio |
PBD |
162.6 |
0.75 |
0.047 |
-15.85 |
|
PowerShares Cleantech Portfolio |
PZD |
149.9 |
0.67 |
0.166 |
-0.66 |
|
Market Vectors – Global Alternative Energy ETF |
GEX |
146.1 |
0.62 |
0.058 |
-17.08 |
|
iShares S&P Global Clean Energy Index Fund |
ICLN |
57.3 |
0.48 |
1.858 |
-21.21 |
|
First Trust NASDAQ Clean Edge Green Energy Index Fund |
QCLN |
35.1 |
0.6 |
N.A. |
-5.1 |
The six ETFs tracking clean energy verticals are:
|
name |
ticker |
mar_cap (million USD) |
expense (%) |
dividend (%) |
YTD (%) |
|
Guggenheim Solar ETF |
TAN |
163 |
0.7 |
N.A. |
-17.85 |
|
First Trust Global Wind Energy ETF |
FAN |
56.2 |
0.6 |
3.387 |
-28.74 |
|
First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund |
GRID |
32.3 |
0.7 |
0.389 |
-3.82 |
|
PowerShares NASDAQ OMX Clean Edge Global Wind Energy Index Fund |
PWND |
28.1 |
0.75 |
N.A. |
-31.37 |
|
Market Vectors – Solar Energy ETF |
KWT |
27.8 |
0.66 |
0.68 |
-18.44 |
|
PowerShares Global Progressive Transportation Portfolio |
PTRP |
5.7 |
0.75 |
1.079 |
6.74 |
And finally, the mutual funds are:
|
name |
ticker |
assets (million USD) |
expense (%) |
dividend (%) |
YTD (%) |
|
New Alternatives Fund Inc/fund |
NALFX |
245.1 |
1.02 |
0.958 |
-9.1 |
|
Calvert Global Alternative Energy Fund |
CGAEX |
185.6 |
1.85 |
|
-16.73 |
|
Guinness Atkinson Funds – Alternative Energy Fund |
GAAEX |
44.4 |
1.85 |
4.285 |
-16.31 |
|
Firsthand Alternative Energy Fund |
ALTEX |
5.4 |
2.15 |
|
-9.49 |
For comparison, I’ve computed the returns for some broad market indices which are easily accessable to investors via any US brokerage:
|
name |
ticker |
mar_cap |
expense |
dividend |
YTD |
|
Vanguard Emerging Markets ETF |
VWO |
38,746.30 |
0.27 |
1.162 |
14.17 |
|
iShares S&P 500 Index Fund/US |
IVV |
22,775.60 |
0.09 |
1.905 |
5.58 |
|
Vanguard Europe Pacific ETF |
VEA |
4,982.00 |
0.15 |
2.266 |
3.54 |
|
iPath Dow Jones-UBS Commodity Index Total Return ETN/United States |
DJP |
2,253.50 |
0.75 |
|
0.71 |
|
Vanguard Total World Stock Index Fund ETF |
VT |
708.8 |
0.3 |
1.442 |
6.29 |
These are a lot of numbers but a couple of observations jump out:
- Only one clean energy ETF out of the 16, with the smallest market capitalization, has managed a positive return. In comparison, all the broad market indices are positive. Government support for clean energy hasn’t translated into positive returns, at least this year. Without policy support, results would in all likelihood be worse. Any waivering in govenmental policy is definitely a sell signal.
- The sector is starting to attract sufficient investment for ETF and mutual fund sponsors to stick around. Whether the breakeven market cap for an ETF is $50 or $100 million, over half the ETFs are big enough to reward the ETF sponsor.
- Two of the mutual funds are large enough to be sustainable. Firsthand, with only $5.4 million in assets, will either grow or shut down. With it’s 1.85% expense ratio on $44.4 million in assets ($0.8 million in fees) GAAEX may be large enough to be an ongoing proposition.
- On the active versus index comparison, I’m not seeing much value added by the active managers when compared to the broad based ETFs.
- There is clearly a first mover advantage in the ETF business. Powershares was first to market with Wilder and currently has the three largest broadbased ETFs. Claymore was first to market with a vertical and currently has the largest vertical fund.