Invesco Ltd.’s PowerShares Cleantech fund beat 35 other low-carbon energy funds last year by tracking shares of companies including Meyer Burger Technology AG and GT Solar International Inc., Bloomberg New Energy Finance said.
The exchange-traded fund with a market value of $152 million posted a dollar return of 7.6 percent in 2010. It beat Winslow Green Growth Fund’s 7.4-percent gain and a 4.5 percent return for DnB Nor ASA’s Miljoinvest fund, which placed second in 2009 and first in 2007, according an annual league table compiled by the London-based research company.
The winner tracks the Cleantech Index produced by San Francisco-based Cleantech Group LLC. Rafael Coven, who manages the index, said the growth of clean technologies from recycling equipment and water purifiers to wind and solar power is “unstoppable,” and that the key to investing in the industry is to avoid a broad exposure by carefully screening stocks.
“There’s going to be some winners and a lot of losers,” Coven said in an interview. “If you’d invested in all of them, you’d have lost money, because the terms of the losers will wipe out what you’ve gained from the winners.”
Clean energy shares last year did worse than the stock market’s benchmark indices, with the Wilderhill New Energy Index declining 15 percent and the FTSE Renewable and Alternative Energy Index falling 8 percent. That compares with a 13 percent gain in the Standard & Poor’s 500 Index and an 11 percent gain for the Dow Jones Industrial Average.
SAM Fund Drops
The top fund in 2009, SAM Smart Energy, dropped to 26th this year after a 14.3 percent decline in value, according to New Energy Finance. PowerShares Cleantech rose from 14th in last year’s table.
Kristin Sadlon, a spokeswoman for Invesco PowerShares Capital Management, which is based in Wheaton, Illinois, referred questions to Coven, who manages the underlying index.
The Cleantech Index currently contains 71 companies, and is tracked by $200 million to $300 million of funds, with a new fund due to be announced in Latin America within a month or so, Coven said. He declined to give details. The index is aimed at long-term investment rather than short-term gains, he said.
Its biggest holdings were Siemens AG, ABB Ltd. and Schneider Electric SA.
Coven said for now he’s avoiding too much exposure of the index to the wind power business, which “has become a complete commodity,” and solar cell makers, because “the Chinese will continue to flood the market and destroy pricing.”
At the same time, Coven said he “loves” companies such as Meyer Burger Technology AG, Centrotherm Photovoltaics AG, and GT Solar International Inc., which make the equipment used to manufacture solar cells.
“There’s a very large opportunity to differentiate the product,” Coven said. “As long as the Chinese in particular want to keep adding capacity, they’re going to buy these machines that help them lower the costs and help them produce more.”
Chinese demand for waste paper to make the boxes they need for their exports also benefits companies such as Kadant Inc. in Westford, Massachusetts, and GLV Inc. in Montreal, which make equipment to recycle paper, said Coven.
Another area that “really excites us” are companies whose products make buildings, transport and manufacturing more energy efficient, such as ABB Ltd. in Zurich and Johnson Controls Inc. in Milwaukee, he said.
Coven said a measure of the care he takes in picking the stocks in the Cleantech Index is that he puts his own money where his mouth is.
“I invest my money and more importantly, I invest my mum’s money” in stocks in the index and the exchange-traded funds that track it, Coven said. “So it had really better do well.”