Interactive Investor

Coronavirus ii ACE 30 update: VT Gravis Clean Energy Income Fund

interactive investor's analysts bring you an urgent update on this ii ACE 30 rated ethical investment.

27th March 2020 15:25

Dzmitry Lipski from interactive investor

interactive investor's analysts bring you an urgent update on this ii ACE 30 rated ethical investment.

The coronavirus outbreak and subsequent pandemic have had a significant impact on the global economy and financial markets. Many share and fund prices have fallen sharply in a very short space of time, as has the cost of oil and other commodities. Volatility has reached levels not seen since the peak of the financial crisis in 2008, and many assets remain prone to sharp movements both up and down.

Given these unprecedented circumstances, with citizens in many of the world’s largest cities confined to their homes, we are collecting updates from managers of funds on the ii ACE 30 rated list of ethical investments. 

Here is the latest from Will Argent at the VT Gravis Clean Energy Income Fund, written on 24 March.

“As a clean energy infrastructure fund, generally CLEAN is exposed to very long term, visible cash flows that are largely insensitive to broader economic conditions. Where we do have exposure to, for example supply chain companies, with greater economic sensitivity, this is very modest. Where we do have exposure to companies with greater economic sensitivity, for example those involved in the supply chain, this is very modest. 

“As such, the fundamental earnings power of the underlying portfolio companies should not be impacted significantly by the pandemic, and certainly not in the long term. Critical services such as power do not cease to be required in the current environment. Infrastructure, by its very nature, represents the types of assets whose functions benefit from stable demand throughout varying economic and social environments. Through this period they will be ‘steadily earning’.

“However, with investors seeking respite from the continual pressure on share prices currently being experienced, our companies and by extension, the Fund, is not immune from the panic currently gripping markets. As things normalise, as we anticipate they will do in time, and investors appreciate the limited damage our core universe will have suffered as a result of the broader economic environment, we think it reasonable to anticipate a relatively swift recovery for prices in our sector. The moves to slash interest rates in the UK and the US merely increases the attractiveness of our yield-focused strategies.

“The portfolio is well structured, and with broad-based selling pressure impacting all companies, the Adviser is not seeking to ‘tinker’ with their composure in the prevailing environment. There are no company-specific, nor subsector-specific concerns that would provide the impetus to alter the composition of the portfolios. In addition, there is negligible exposure to jurisdictions that are suffering the worst of the outbreak to date.

“Infrastructure remains a very stable asset class at a fundamental level and we would implore unit holders to sit tight and await recovery. As sentiment improves, we expect prices to adjust sharply and those who sell in the midst of the chaos are likely to compound things by missing this key moment.”

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