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BlackRock New Energy in recovery mode

FUND PROFILE: The reduction of available credit lines impacted on the renewables sector - and with it the BlackRock New Energy portfolio
February 12, 2010

There are just three UK investment trusts covering this specialist segment of the energy market, which may seem surprising given the level of media coverage it invariably attracts. BlackRock New Energy has been with us for nearly a decade, and its performance has mirrored the changing fortunes of the renewables industry since the turn of the millennium.

IC TIP: Ignore at 43.5p

Robin Batchelor has managed the trust's portfolio since inception – and given the flux within the sector, its no easy task. While it's true that the push towards viable alternative energy sources has certainly gathered momentum in recent years, the industry, it must be remembered, is still in early stage development, and all fledgling industries are inherently vulnerable to constrictions in credit lines. Valuations were driven down throughout much of 2008 and into the following year, especially for those companies overly reliant on credit for driving growth. There was increased consolidation within the industry, and conventional utilities snapped up whichever promising alternative energy companies that would fit neatly in with their business models.

BlackRock's performance during this period was predictably dire, and the 8.46 per cent rise in NAV over the past year has only partly mitigated 2008's steep decline. However, the trust has performed rather better over the long-haul: an annualised five-year return at just under 10 per cent has been attained despite the credit woes, and at 1.4 per cent, the TER is relatively modest.

Looking forward, the trust's performance is linked to a large degree on general energy prices. As prices rise for gas, petroleum and coal, the cost competitiveness of alternative energy sources improves. It is generally considered that energy costs will trend upwards as industrial demand increases in the world's developing economies. Environmental legislative changes are also underpinning the growth of the sector.

BLACKROCK NEW ENERGY
PRICE43.5pNAV47.46p
SIZE OF FUND£125mPRICE DISCOUNT TO NAV8.34%
No OF HOLDINGS:671 YEAR PERFORMANCE9.43%*
SET UP DATE23 Oct 003 YEAR PERFORMANCE -9.53%*
MANAGER START DATE23 Oct 005 YEAR PERFORMANCE9.81%*
BETAnaTOTAL EXPENSE RATIO1.40%*
VOLATILITY 3-YEAR1.51%*YIELDnil
TRACKING ERRORnaGEARING100
SHARPE RATIO-0.06*MORE DETAILSblackrock.co.uk

Source: Datastream & *Morningstar

Top ten holdings (as at 30 Nov)

HoldingPercentage
American SuperconductorUSA
Archer Daniels Midland USA
FPL Group USA
GamesaCorp Technologica Spain
IberdrolaRenovables Spain
Itron USA
Johnson Matthey UK
Sasol South Africa
VestaWind SystemsDenmark
WackerChemie Germany

Sector breakdown

SectorPercentage
Renewable Energy 54.3
Enabling Energy Technology 21.4
Alternative Fuels 13.6
Materials Technology 5.8
Energy Storage2.3
Auto & On-site Generation 0.8
Net current assets1.8