VT GRAVIS CLEAN ENERGY INCOME FUND. January 2019

Transcription

1 C L E A N E N E R G Y VT GRAVIS CLEAN ENERGY INCOME FUND January 2019

2 CONTENTS 3 Introduction to clean energy 10 Introduction to the fund 16 Fund characteristics 23 Clean energy investment credentials 27 Appendix 2

3 Introduction to clean energy 3

4 WHAT IS CLEAN ENERGY? The sustainable energy association defines clean energy as energy derived from renewable, zero-emissions sources ( renewables ), as well as energy saved through energy efficiency ( EE ) measures. Solar Wind Hydro Energy Storage Energy Efficiency Bioenergy Smart Grid Geothermal Heat Pumps 4

5 Energy Generation (Mtoe) Energy Consumption (Mtoe) CLEAN ENERGY SECTOR OUTLOOK The electricity sector is experiencing its most dramatic transformation since its creation more than a century ago. 1 In 2017 world electricity demand increased by 3.1%, significantly higher than the overall increase in energy demand Policy support and technology cost reductions are leading to rapid growth in variable renewable generation capacity Renewable consumption has increased significantly over recent years, in part due to advances in energy storage solutions Renewables contribution to Total Electricity Generation 2 Renewable Energy Consumption by Type 2 25,000 3,000 20,000 15,000 2,000 10,000 1,000 5, Renewable Energy Generation Total Electricity Generation Hydro Solar Wind Biomass/Geothermal/Other Source: BP Statistical Review of World Energy - all data

6 KEY INVESTIBLE AREAS IN CLEAN ENERGY SECTOR Companies making energy generation and supply cleaner and more efficient There are huge inefficiencies in delivering power to users. Globally 56% of power generated is wasted 1 Coal and oil still account for over 60% 1 of total global energy supply creating significant environmental damage Large and growing market for companies involved in making energy generation and supply cleaner and more efficient Companies making energy usage cleaner and more efficient Cars use 10.5bn barrels 2 of oil per annum globally. Electric vehicles are forecast to reduce demand by over 3.6bn barrels per year by % of UK domestic household electricity bills are for appliances on standby 3 c. 1.5bn wasted Only 5% of the power drawn by a phone charger is used to charge the phone 3. The other 95% is wasted when it is left plugged in There are a huge number of companies looking to make global energy usage more efficient 1 Sources: International Renewable Energy Agency (2017) Renewable Energy Statistics International Organization of Motor Vehicle Manufacturers 3 Energy Savings Trust 6

7 KEY INVESTIBLE AREAS IN CLEAN ENERGY SECTOR Operational & Cash generative Renewable Energy assets such as Wind, Solar, Hydro & Biomass plants 7

8 INVESTMENT EXAMPLES We invest in 8

9 KEY ATTRACTIONS OF THE SECTOR Electricity from clean sources is a significant contributor to the world s growing need for increased power Long dated and dependable income Income streams generated by Renewable Energy assets, in the form of subsidy payments and revenue from power sales, tend to be reliable and predictable Renewable Energy assets have long useful lives and have long-dated expected income streams Income diversification Portfolio overlap is negligible with other, traditional, sources of income Inflation linkage c.25% of the portfolio has inflation protection Capital growth An exposure to Greener Energy companies offers the potential for capital growth because demand in the sector is growing The sector may meet the expectations of investors concerned about: Environmental, Social and Governance portfolio management Sustainability Climate Change 9

10 Introduction to the fund 10

11 VT GRAVIS CLEAN ENERGY INCOME FUND The fund is an open ended investment company UCITS V investing in the Global Clean Energy sector - Fund 1 size as at 31 December 2018 was 6.84m - Designed to give regular income, preserve capital and protect against inflation Comprised of Yield Co Equity, Closed End Investment Companies and Equities Net Dividend Yield 4.07% (C GBP Inc) Low correlation with other traditional asset classes: - UK 10 year Gilts MSCI World MSCI World Infrastructure S&P Clean Energy Gravis has considerable experience in the Clean Energy sector. VT Gravis Clean Energy is the sister fund to VT Gravis UK Infrastructure which will have a 3 year track record on January 25 th and also invests in the sector. 1 Fund launched on 18 December Since inception to 31 December

12 Increasing Volatility RISK PROFILE OF TARGET CLEAN ENERGY SECTORS 83.5% of the Gravis Clean Energy Fund Contracted Contracted Short Term Contract Commercial Mid length contracts Fixed price Operational assets New technology Construction Long dated Subsidised Operational assets Short dated fixed price Additional capacity Greener energy projects Installed Wind Solar Hydro Decreasing cashflow predictability 12

13 INVESTMENT PHILOSOPHY AND SECURITY SELECTION PROCESS FACTORS DRIVING INVESTMENT DECISIONS The Fund is exposed to a broad range of clean energy investments with a focus on the stability and security of quarterly distributions. The underlying investments of the fund are split between securities issued in OECD countries. Yield sustainability Investment is focused on companies with: - Mature technologies and established track records - Attractive long-term and dependable cash flows - Income generative and profitable with scope for capital growth Credibility of management team Cashflow dependability/ visibility Investments will be selected for inclusion in the Fund based upon a number of key factors, the most significant are: Yield sustainability, inflation hedging characteristics, valuation, size/liquidity and low relative volatility. The fund will be actively managed with a view to maximising returns whilst keeping costs to a minimum. It is the intention of the Fund adviser to keep turnover to a minimum. It is generally the equities in the portfolio which contribute the greatest level of volatility and it is this bucket in which there is likely to be the most active trading. Low relative volatility Size/liquidity Inflation hedging characteristics Valuation 13

14 SUITABILITY This fund is for investors seeking stable long term dividend income, low volatility, capital protection and growth. REAL ASSETS INCOME DRAWDOWN The Clean Energy sector is diverse and offers low correlation with other asset classes. Investment in clean energy enables investors to contribute to positive environmental solutions To provide investors with regular, sustainable dividends over the long term. Provides capital protection in periods of equity market stress. INFLATION PROTECTION Cash flows from Clean Energy assets are often linked to inflation, thereby protecting cash flows in real terms over time. ALTERNATIVE TO FIXED INCOME AND PROPERTY Clean Energy assets offer an alternative source of income to Bonds and Property. Cashflows from renewable energy assets often include an element of government subsidy or may benefit from tax incentives. LOW VOLATILITY Dependability of cashflows and stability of asset valuations ensures low relative volatility. 14

15 GRAVIS CAPITAL MANAGEMENT Gravis Timeline Since launching its first product (GCP Infra) in 2010, Gravis has grown to 2.41bn of AUM across three closed-ended funds with 2.11bn AUM and two open-ended funds with 295m AUM The Gravis team has consistently demonstrated innovation over time and all its funds are original ideas Gravis was founded in 2008 by seven founding partners, including Chairman, Stephen Ellis, and CEO, Rollo Wright In 2010, Gravis launched its first product and the first UK listed fund focused on investing in debt for UK infrastructure projects, GCP Infra Gravis launched the first REIT focused on student accommodation, GCP Student David Conlon joined Gravis as a director Gravis launched GCP Asset Backed Gravis launched its first OEIC focused on investing in listed infrastructure, Gravis UK Infra Phil Kent joined Gravis as a Director, leading the team s origination and execution of project finance and asset backed investments Nick Barker joined as a Director and Co-Lead Manager of GCP Student Gravis launched its second OEIC at the end of 2017, the Gravis Clean Energy fund William Argent joined Gravis as a fund manager for Gravis UK Infra and Gravis Clean Energy Saira Johnston joined as CFO 1677m Gravis s total AUM reached 2.41bn in Dec 2018 Phil Kent became lead manager of GCP Infra 2410m 1053m 522m 674m 40m 111m 266m Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Dec-18 15

16 Fund characteristics 16

17 FUND GUIDELINES AND CHARACTERISTICS Limits within which the fund is managed Wider Limits - Minimum of 80% of the portfolio is exposed to operational - availability based or contracted renewable energy assets - Maximum of 20% of portfolio is exposed to thematic companies involved in clean energy and energy efficiency (e.g. supply chain, project funding, construction, battery storage). Must have demonstrable track record of generating operating profits - Maximum allowable exposure to OEICs 10%. (Current exposure 0%). - Invests in listed securities in OECD nations only - Minimum 90% of the portfolio has a minimum market cap 250m or equivalent - Maximum of 17.5% of portfolio may be invested in corporate debt - Minimum of 22 holdings - Subject to UCITS V Limits (e.g.5/10/40) - Maximum holding 9.9% Current Portfolio Characteristics - Number of holdings 27 - Largest holding size of 6.78% - Turnover expected to be no greater than 20% p.a. - Exposure to ~ 900 separate operational renewable energy assets - Currency The portfolio s exposure to GBP/USD is presently hedged (although this is not expected to be long term). This equates to 32% of the portfolio. 17

18 FUND PERFORMANCE C GBP Net Accumulation 18 December December VT Gravis Clean Energy Income Fund - C GBP Accumulation Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 VT Gravis Clean Energy C GBP Acc S&P Global Clean Energy Performance Dec 18 3 months 6 months 12 months Since Inception* Volatility VT Gravis Clean Energy Income Fund -3.82% -1.63% 1.83% 1.69% 1.65% 8.13% S&P Clean Energy -6.48% -0.22% -0.48% -2.99% -1.38% 15.22% * The fund launched on 18 December Data as at 31 December Past performance is not necessarily a guide to future performance. Gravis Clean Performance is illustrated by the C GBP Net Accumulation share class. 18

19 FUND PERFORMANCE Dividends Quarterly since inception December 2018 Dividends (pence per share) 2017 * 2018 Q1 Q2 Q3 Q4 Total 12m Net Yield + VT Gravis Clean C GBP Inc 0.32p 0.76p 1.10p 1.03p 1.08p 4.29p 4.07% Note: * Part period in 2017 from 18 December to 31 December Correlation Comparison 18 December December 2018 Comparison Correlation Return Volatility 12m Net Yield VT Gravis Clean Energy Income Fund - 1.6% 8.1% 4.1% MSCI UK % 12.8% 5.0% MSCI World % 14.1% 2.8% S&P Clean Energy % 15.2% 2.8% + The fund launched on 18 December Data as at 31 December Past performance is not necessarily a guide to future performance. Gravis Clean Performance is illustrated by the C GBP Net Accumulation share class. 19

20 PORTFOLIO CONSTRUCTION Target exposure is to a broad range of Clean Energy investments with a focus on the stability and security of quarterly distributions. (As at 31 December 2018) - c.83.5.% of the portfolio is invested in companies that own operational Renewable Energy assets, primarily wind, solar and hydro projects - Mature technologies with established track records - Attractive, long-term and dependable cash flows - c.12.1% of the portfolio is invested in companies directly involved in Renewable and Greener Energy - Income generative and profitable - Scope for capital growth - 4.4% is cash Geographical Breakdown - The portfolio currently consists of securities listed in the US (32.0%), UK (39.5%), Canada (10.4%) and Europe and Rest of World (13.7%). 4.4% is in cash. UK 39.5% US 32.0% Canada 10.4% Denmark 5.0% New Zealand 3.4% Germany 3.4% Spain 0.8% Italy 0.7% Cash 4.4% Sweden 0.5% US dollar 32.0% British pound 39.8% Canadian dollar 10.4% Euro 9.0% Danish krone 4.9% New Zealand dollar 3.4% Swedish krona 0.5% 20

21 PORTFOLIO SNAPSHOT Portfolio as at 31 December 2018* Holdings Asset type Top 10 holdings NextEnergy Solar Fund Ltd 6.78% Pattern Energy Group Inc 6.40% TerraForm Power Inc 6.36% John Laing Environmental Assets Group Ltd 6.34% Greencoat UK Wind PLC 5.33% Yield Co Equity 47.83% Equities 9.20% Cash 4.40% Closed End Investment Companies 38.57% Renewables Infrastructure Group Ltd 4.87% Hannon Armstrong Sustainable Infrastructure Capital Inc 4.78% Foresight Solar Fund Ltd 4.69% Atlantica Yield PLC 4.68% Clearway Energy Inc 4.43% Volatility Volatility Returns Turnover VT Gravis Clean Energy Income Fund 8.1% 1.6% 25.67% S&P Clean Energy 15.2% -1.4% Underlying project exposure Wind 46.7% Solar 30.9% Non-Power Generation 8.7% Hydro 4.6% Natural Gas/CCGT 3.4% Geothermal, Biomass, AD 1.3% Cash 0.6% *The fund launched on 18 December Data as at 31 December Past performance is not necessarily a guide to future performance. Gravis Clean Performance is illustrated by the C GBP Net Accumulation share class. 21

22 12 Month Average Return (%) 1YR RISK & REWARD Data as at 31 December 2018* Average 12 month volatility (12.46%) VT Gravis Clean C Acc GBP MSCI World Infrastructure MSCI World MSCI UK S&P Global Clean Energy Average 12 month return (-2.52%) Month Average Volatility (%) 12 Month Volatility 12 Month Returns VT Gravis Clean Energy Income Fund 8.20% 1.69% MSCI UK 12.87% -8.82% MSCI World 14.22% -3.04% MSCI World Infrastructure 11.70% 0.57 S&P Clean Energy 15.33% -2.99% *Data as at 31 December Past performance is not necessarily a guide to future performance. Gravis Clean Performance is illustrated by the C GBP Net Accumulation share class. 22

23 Clean Energy Investment Credentials 23

24 FUND INVESTMENT TEAM The investment advisers to the VT Gravis Clean Energy Income Fund. William Argent, CFA Fund Manager Will is a Fund Manager at Gravis. He is responsible for the day-to-day management of the VT Gravis Clean Energy Fund. He joined the company in 2017 having spent 12 years working as an analyst within the private wealth management sector. His responsibilities have included the analysis and recommendation of direct equities and closedend investment vehicles for client portfolios, setting asset allocation and strategy, and the management of in-house OEICs. +44 (0) william.argent@graviscapital.com Stephen West Director (non-executive) & founder Stephen is a director of Gravis, joining the company in 2015 following many years working on projects with the original founders. He is the strategic advisor to the VT Gravis Clean Energy Fund. He qualified as a Barrister and thereafter spent over twenty years in the fixed income divisions at bulge bracket US and Swiss investment banks. He ran UBS s global credit underwriting, trading, sales and research business a role which encompassed the bank s securities and loan divisions. +44 (0) stephen.west@graviscapital.com 24

25 WIDER GRAVIS TEAM CLEAN ENERGY EXPERIENCE Phil Kent Phil Kent, a Director at Gravis, manages the GCP Infra fund (c. 1.2bn). He works alongside a number of sector analysts who also provide a wealth of sector specialist knowledge for Will Argent to draw upon. Phil has been involved in the energy sector for over ten years, working initially as a consultant within PA Consulting s Energy practice, focusing on energy markets and energy asset valuations. VT Gravis UK Infrastructure Fund Will Argent also manages the VT Gravis UK Infrastructure Fund (c. 290m). This fund had over 40% investment in renewable energy funds at the end December The fund has a similar investment process to that of the VT Gravis Clean Energy Income Fund. Gravis Investments in Renewable Energy Gravis have invested over 600m in renewable energy projects and have built up considerable expertise analysing investments in the sector and managing installed assets. 25

26 RATING 3D Investing We have recently been awarded a 4 star rating by 3D Investing, who specialise in the rating of ethical and sustainability funds based on thorough analysis of the underlying holdings, the track record of the fund, and the extent to which it delivers on the six categories examined: Social Impact Sustainable Investment Capability Risk Financial Performance Transparency Ethical Issues We have been rated four stars. A four star rating indicates excellence in meeting the need of socially motivated investors. With 5 stars being the highest possible rating. A 4 star rating means that the fund carries a high level conviction in terms of transparency, social impact and is not exposed to ethically controversial companies. Of the 195 funds in the 3D sustainably investment universe, only 14% carry a rating of 4 stars or higher. 3D state on their website Four star funds are amongst the best 3D funds. They are likely to have a high social impact with limited ethical concerns. 26

27 Appendix 27

28 INVESTMENT UNIVERSE At launch the total market cap for the investment universe was circa 663.3bn. Security type Description Total Market Cap Equities Equities in companies involved in the Renewable and Greener Energy sectors 403bn Green bonds Green bonds enable capital-raising and investment for new and existing projects with environmental benefits 230bn Closed ended investment companies Investment companies that primarily own operational renewable energy assets 4.1bn Yield co s Investment companies that primarily own installed, operational clean power assets 29.2bn Total 666.3bn 28

29 SIMULATED PORTFOLIO (TOTAL RETURN) Total return 30 June 2015 to 29 December 2017 Simulated Portfolio (Total Return) Return Volatility Correlation 2016 return 2017 ytd Simulated Portfolio 39.80% 11.57% % 14.50% S&P Clean Energy GBP (Total Return) 1.10% 18.89% -0.84% 10.46% Stock overlap with major alternative indices MSCI UK MSCI World MSCI World High Divi Yield ishares UK Dividend Index 0.31% 0.45% 0.95% 0.00% 1. Simulated performance relative to S&P Clean Energy Index (Net Dividends Reinvested & converted to GBP) from close 30 June 2015 to close 29 December Hypothetical past performance is not necessarily indicative of future results. Simulated performance is before costs and fees. 29

30 VT GRAVIS CLEAN ENERGY INCOME FUND: PROJECT FINANCE MODEL IN OPERATION Finance providers Special purpose vehicle established with the specific purpose of segregating and handling cash flows Public sector support in the form of subsidies and tax incentives Equity Finance Capital in Payments to equity holders Cash flows from sale of energy output. Public sector support via subsidies and/or tax incentives Capital in SPV Debt Finance Repayments of capital & interest Service providers contracted to provide services associated with monetising the asset Facility Managers Operations and Maintenance Construction costs go into building the asset Insurance Repayment of interest, debt & equity 30

31 DEPTH OF PROJECTS WITHIN THE FUND Individual projects Individual projects Individual projects Greencoat UK Wind 30 wind projects 285 MW capacity Bluefield Solar 86 Solar assets MW capacity Terraform Power 95 Solar & Wind assets 3640 MW Capacity Dividends Dividends Dividends VT GRAVIS CLEAN ENERGY INCOME FUND HAS EXPOSURE TO OVER 900 OPERATIONAL RENEWABLE ENERGY ASSETS Aim is for investors to receive 4.5% income net of charges per annum 31

32 KEY TERMS VT Gravis Clean Energy Income Fund Fund Size 6.84m Dividend Yield Net Yield C shares 4.07% (as at 31 December 2018) Inflation Protection Share Classes Yes Minimum Investment 100 Capped fund operating charges 0.8% Issue Price 1 (as at 18/12/2017) Valuation and trading Investment Association Sector Holdings Number of holdings Distributions Classification Clean & Institutional / Income & Accumulation / GBP, USD & EURO Daily 12pm IA Global Global securities including equities, green bonds, closed ended investment companies and Yield Co s Minimum of 22 holdings 27 currently Quarterly (payable 1 month in arrears) January, April, July, October Non-complex ISINs & SEDOLs Acc GB00BFN4H792 BFN4H79 Inc GB00BFN4H461 BFN4H46 $ Acc GB00BFN4H917 BFN4H91 $ Inc GB00BFN4H685 BFN4H68 Acc GB00BFN4H800 BFN4H80 Inc GB00BFN4H578 BFN4H57 32

33 INVESTMENT AND DISTRIBUTION Investment Manager Valu-Trac Investment Management Ltd. i. Valu-Trac Investment Management Limited was established as an authorised investment manager in ii. Valu-Trac Investment Management Limited launched Valu-Trac Administration Services in 2010, to provide Authorised Corporate Director (ACD) and administration services to UK regulated funds and their delegated investment managers. iii. Valu-Trac Investment Management Limited, as ACD, administers over 4.7bn of assets under management. iv. Valu-Trac Investment Management Limited employs 46 staff and has offices in the North of Scotland and London. Investment Advisor Gravis Advisory Ltd. i. Gravis Advisory Limited is owned and managed by Gravis Capital Management Ltd ( Gravis ). ii. Gravis was established in May 2008 as a specialist investor in infrastructure and now manages c. 2.5bn of assets in the sector in the UK. iii. Funds under management include the FTSE 250 company GCP. Infrastructure Investments Limited, which has invested over 1bn in UK infrastructure, and GCP Student Living Plc which has invested over 600m in UK student accommodation. iv. Gravis Advisory Limited is a subsidiary of Gravis Capital Management and is Investment Adviser to the Fund. Distribution Gravis Advisory Ltd. i. The team of four consultants has assisted in raising over 2bn since launch in ii. The team has raised new capital for IPOs, and further capital raising through C share offerings and Placing Programs, UCIS Funds, UCITS funds, UK OEICs, VCTs and Private Equity. iii. The team has combined experience of over 80 years in the UK. 33

34 PLATFORMS & WRAPPERS Available on the following platforms: Suitable for: Aegon Alliance Trust Savings Aviva Fidelity Hargreaves Lansdown Novia Pershing Transact Direct investors SIPPs ISAs Charities Offshore bonds Companies QROPS 34

35 CONTACT INFORMATION Investment Manager and Dealing Valu-Trac Investment Management Limited Valu-Trac Dealing Investment Adviser Will Argent Fund Adviser Stephen West Director & Fund Adviser Distribution William MacLeod Director Ollie Matthews Sales Director Robin Shepherd Sales Director Nick Winder Sales Director

36 IMPORTANT NOTICE WARNING: The information in this Report is presented by Valu-Trac using all reasonable skill, care and diligence and has been obtained from or is based on third party sources believed to be reliable but is not guaranteed as to its accuracy, completeness or timeliness, nor is it a complete statement or summary of any securities, markets or developments referred to. The information within this Report should not be regarded by recipients as a substitute for the exercise of their own judgement. The information in this Report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. In the absence of detailed information about you, your circumstances or your investment portfolio, the information does not in any way constitute investment advice. If you have any doubt about any of the information presented, please consult your stockbroker, accountant, bank manager or other independent financial advisor. Value of investments can fall as well as rise and you may not get back the amount you have invested. Income from an investment may fluctuate in money terms. If the investment involves exposure to a currency other than that in which acquisitions of the investments are invited, changes in the rates of exchange may cause the value of the investment to go up or down. Past performance is not necessarily a guide to future performance. The hypothetical performance measurements are illustrative only and offer no guarantee of future performance, profitable or unprofitable, actual or theoretical. Since hypothetical performance measurements do not represent actual trading they may not reflect the impact that material economic or market factors might have made on a portfolio manager s decisions were the portfolio manager actually managing a client s money. The information provided is "as is" without any express or implied warranty of any kind including warranties of merchantability, non-infringement of intellectual property, or fitness for any purpose. Because some jurisdictions prohibit the exclusion or limitation of liability for consequential or incidental damages, the above limitation may not apply to you. Users are therefore warned not to rely exclusively on the comments or conclusions within the Report but to carry out their own due diligence before making their own decisions. Unless otherwise stated Equity Market price indices used within this publication are sourced or derived from data supplied by MSCI Inc Valu-Trac Investment Management Limited and its affiliated companies, employees of Valu-Trac Investment Management Limited and its affiliated companies, or individuals connected to them, may have or have had interests of long or short positions in, and may at any time make purchases and/or sales as principal or agent in, the relevant securities or related financial instruments discussed in this Report Valu-Trac Investment Management Limited. Authorised and regulated by the Financial Conduct Authority (UK), registration number This status can be checked with the FCA on or on the FCA website (UK). All rights reserved. No part of this Report may be reproduced or distributed in any manner without the written permission of Valu-Trac Investment Management Limited. Valu-Trac is a registered trademark. Any opinions expressed in this Report are subject to change without notice and Valu- Trac is not under any obligation to update or keep current the information contained herein. Sources for all tables and graphs herein are Valu-Trac unless otherwise indicated. 36

37 INVESTMENT IDEAS FOR THE LONG RUN 37