Is Guinness good for us?
As the soaring cost of oil focuses the minds of consumers and governments on the future of energy supplies, an investment fund has been launched to capture profits from an expected surge in renewable fuel industries.
Tim Guiness: Looking for greener energy
The Guinness Alternative Energy Fund, which has so far attracted £12m, is managed by Tim Guinness, who set up Guinness Asset Management five years ago to specialise in portfolios of energy company shares.
Until recently, he ran the £200m Investec Global Energy Fund, a broader-based energy portfolio that owned shares in oil giants such as Royal Dutch Shell and Exxon Mobil.
Unsurprisingly, it has performed extremely well – returning more than 100% in the past three years.
The new Dublin-based fund is the latest to specialise in firms making energy from non-fossil fuel sources – solar, wind, hydro, fuel cells and biofuels.
Rivals include Impax Environmental Markets and BlackRock New Energy Technology.
Other fund managers, such as Sarasin and Foreign & Colonial, are also following the trend. The Impax fund, a £390m investment trust quoted on the stock market, has been going since 2002 and has returned 224% in the past five years.
The equivalent Black-Rock trust, a £170m fund launched in 2000, has returned 393%.
Tim Guinness denies he is 'jumping on the green bandwagon', but says he is aiming at investors seeking long-term value opportunities over the next 20 years.
'Current drivers for growth include popular concern over climate change and Government support for alternative energies,' he says.
The fund aims to invest in about 50 firms, each with a market capitalisation of at least £50m, that are involved in research or the manufacture of alternative energy sources.
Five years ago there were 35 such companies worth more than £50m. Today, there are 160.
Though 61-year-old Guinness is at the helm of the Alternative Energy fund, the day-to-day running will be shared between his son, Edward, 31, and 26-year-old fund manager Matthew Page.
The fund has a minimum investment of £1,000 if investing through an adviser or broker service. There is an initial charge of 2% and annual management charge of 1.5%.
Helen Richardson of adviser Pantheon Investments in Scunthorpe, Lincolnshire, says: 'Tim Guinness undoubtedly has a very good record with energy funds and, though this is a risky sector, it certainly has great potential'
She warns that many of the companies in which the fund will invest will be small or new.
'Though we have to look at alternative energy sources, it will be difficult to predict which businesses will succeed over the coming years and which will not,' she says.
Ruth Whitehead of adviser Ruth Whitehead Associates in London says: 'This fund is nothing new – there are already a few on the market. But as it is involved in positive engagement in a growth area it offers an exciting opportunity for investors.
'However, this sector is not for the faint-hearted. Investors should hold it as a small part of any portfolio.'
Advisers say that funds such as these should not be confused with funds run on an ethical basis, where certain holdings will be excluded because of the businesses activities or record.
However, new energy funds do overlap with some ethical portfolios.
Ethical investors targeted
Ethical investors are being wooed in a new share issue by Triodos Renewables Energy fund.
The fund hopes to raise £8.5m, which will be invested in renewable energy projects and companies. These include Marine Current Turbines, which is building the world's first tidal turbine in Northern Ireland.
According to Dutch ethical bank Triodos, buying 1,800 shares, for a total of £2,970, will produce enough renewable energy to cut 10 tonnes of carbon dioxide emissions – the average Briton's annual footprint.
James Vaccaro of Triodos Renewables says: 'With the Government's target of 15% of the electricity supply to come from renewable energy by 2015, the UK must catch up. The sector is a strong growth industry.'
Shareholders who invested in the last share issue in 2005 have seen a return of 22.9%. Minimum investment is £825, or 500 shares costing £1.65.
Call 0845 478 6361 for a prospectus.
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