ii ACE 40 investments: 
VT Gravis Clean Energy Income Fund

Why we recommend it

The fund is managed by William Argent who joined Gravis in 2017 and has been investing in the listed infrastructure sector since 2006.

This fund offers a balanced solution to an energy led investment in that it targets multiple objectives including the desire to generate income, to preserve capital and to target capital growth. The fund invests in diversified portfolio of global listed securities, including YieldCo’s and investment trusts, and invests in companies that are involved in the operation, funding, construction, generation and supply of clean energy. A minimum of 80% of the portfolio is exposed to operational (availability based or contracted) assets, including renewable energy assets such as wind, solar and hydro, while a maximum of 20% is exposed to thematic companies involved in clean energy and energy efficiency. In respect of the latter, companies must have a demonstrable track record of generating operating profits.

The resultant portfolio has a distinct mid- and small-cap bias however the income focus and asset mix results in a portfolio that typically outperforms during periods of market weakness. From an income perspective the fund has a net yield of around 4.5%.

The fund’s objective is distinct when compared to most funds in the space which typically offer a higher growth profile. This is because, for the most part, companies that operate in this space are younger and developing and reinvestment of earnings is much more common than paying a dividend as the market for clean energy grows rapidly.

The allocation to YieldCo’s, which are publicly traded companies that are focused on returning cash flows generated from renewable energy assets to shareholders, helps support the fund’s income objective and the aspiration for a less volatile return profile as the long-term nature of the underlying contracts helps mitigate development risk and price uncertainty.

Ethical criteria

ii ACE sustainable style: Embraces. This means the investment trust adopts a targeted or proactive approach to ethical investing, in an effort to make a positive impact and/or environmental outcomes.

Fund EcoMarket category: Environmentally Themed. This applies to funds that significantly integrate environmental issues into their investment strategies, sometimes alongside ethical avoidance criteria. Their focus is often around longer term environmental and resource related issues.

The risks

Environmental focus: In certain market conditions, the performance of the fund may differ significantly from others in the peer group that do not exclude specific sectors or companies from a comparable investment universe.

Portfolio concentration: The fund has a highly focused portfolio. The fund typically holds around 30 stocks.

Currency: Because almost half of the fund’s investments are not quoted in sterling, performance may be affected by changes in exchange rates.