As activists push for alternative energy to become more ubiquitous, companies in the energy sector are also seeing demand for green products, from solar panels to wind turbines. This may lead to higher earnings and a rebound in some alternative energy companies' market values, which have been underperformers over the past few years.
Alternative energy equity mutual funds provide investors with professionally managed exposure to many companies involved in various clean energy-related business activities such as solar, hydrogen, wind, geothermal and hydroelectric. Investors who want to gear up for the potential rise in alternative energy stocks should consider these mutual funds. All data are as of January 13, 2020.
- For those seeking investments in green or renewable energy, several mutual funds now exist.
- Many of these funds are considered specialty mutual funds, and so carry higher than average expense ratios and loads.
- Each fund goes about its investment strategy in different ways, and offers various levels of diversification versus focus on alternative energy investments.
Fidelity Select Environment and Alternative Energy Portfolio
The Fidelity Select Environment and Alternative Energy Portfolio (FSLEX) was issued by Fidelity Investments on June 29, 1989. As of May 2020, FSLEX has generated an average annual return of 4.40% since its inception. It has generated an annualized total return of 5.52% over the past five years and an annualized return of 1.59% during the past three years. With the ongoing discussions of climate change, FSLEX is poised to rise over the long run. However, FSLEX has a beta of 1.14, making it riskier than the S&P 500 index.
The fund is advised by Fidelity Management & Research Company LLC (FMR) and other investment advisers. When compared to similar funds, FSLEX charges a relatively low annual net expense ratio of 0.85%. No minimum investment is required.
FSLEX seeks to achieve its investment objective by investing at least 80% of its total net assets in common stocks of companies involved in business activities related to renewable and alternative energy, pollution control, recycling technologies, energy efficiency or other services supporting the environment.
As of March 2020, FSLEX's top 10 holdings constituted 48.83% of the fund's portfolio, and which include: Honeywell International Inc; Eaton Corp; 3M; Trane Technologies, Emerson Electric, Dover Corp, IDEX Corporation, Innospec Inc, TE Connectivity, and Cummins Inc.
Guinness Atkinson Alternative Energy
The Guinness Atkinson Alternative Energy Fund (GAAEX) was issued by Guinness Atkinson Funds on March 31, 2006. GAAEX has a higher than average annual net expense ratio of 1.98%. GAAEX is advised by Guinness Atkinson Asset Management Inc. and requires a minimum investment of $5,000. GAAEX's high annual net expense ratio and minimum investment requirement may not be suited for the average investor.
GAAEX's investment objective is to provide long-term capital appreciation. To achieve its investment objective, GAAEX invests at least 80% of its total net assets in equity securities of U.S. and foreign alternative energy companies. The fund's top industry allocations are 31.15% industrials, 24.28% technology, 22.91% utilities, 10.85% consumer cyclical, and 5.68% basic materials.
As of January 2020, GAAEX carried a beta of 1.14, and has returned a loss of 8.27% annualized since inception, making it a laggard against the S&P 500 - but bear in mind that GAAEX's benchmark index of green energy indices has lost 13% over the same period, so it has in fact outperformed.
Firsthand Alternative Energy Fund
The Firsthand Alternative Energy Fund (ALTEX) was issued on Oct. 29, 2007, by Firsthand. ALTEX is advised by Firsthand Capital Management Inc. ALTEX's turnover rate was 0% in 2019. It charges a high annual net expense ratio of 1.98%. The fund requires a minimum investment of $2,500. As of March 2020, the fund has total net assets of $4.5 million and holds 35 common stocks of alternative energy companies.
ALTEX seeks to provide long-term capital appreciation by investing at least 80% of its total net assets, under normal market conditions, in alternative energy and alternative energy technology companies. ALTEX's top five industry allocations are 41.4% renewable energy, 12% other electronics, 11.4% semiconductors, 8.70% energy efficiency and 2.9% advanced materials. Its top five holdings are SolarEdge Technologies, Inc. at 12.7%, Power Integrations, Inc.at 11.4%, Itron, Inc. at 6.9%, Cree, Inc. at 6.3%, and Vestas Wind Systems A.S. at 5.4%.
When measured against the S&P 500 Index, ALTEX has a beta of 1.19 and has lost 2.06% since inception.
New Alternatives Fund Class A
The New Alternatives Fund Class A (NALFX) was issued in 1982 by New Alternatives Fund Inc. NALFX is the first environmental mutual fund and the first mutual fund to concentrate its portfolio allocations to alternative energy. It is advised by Accrued Equities Inc. and charges an annual net expense ratio of 1.12% and a 3.5% sales load. To invest in NALFX, a minimum investment of $2,500 is required.
NALFX seeks to provide long-term capital appreciation by investing at least 25% of its total net assets, under normal market conditions, in equity securities of alternative energy companies. As of March 2020, its industry allocations are 65.3% renewable energy power producers, 8.4% wind turbines, 8.2% energy conservation, 4.4% sustainable energy financial services, 4.3% water systems and utilities, 3.3% energy storage, .8% transportation, .3% solar photovoltaic, and 5% other assets. It has returned 10.4% since inception, and 10.4% over the past 5 years, on an annualized basis, with a beta of 0.74.
Shelton Green Alpha Fund
The Shelton Green Alpha Fund (NEXTX) was issued by Shelton Capital Management on March 12, 2013. Since NEXTX is a fairly new mutual fund, it is best suited for highly risk-tolerant sophisticated investors. NEXTX is advised by Shelton Capital Management and subadvised by Green Alpha Advisors LLC. The fund charges an above-average annual net expense ratio of 1.34%.
NEXTX invests in common stocks of companies that its subadviser deem to be leaders in managing environmental opportunities and risks, have above-average growth potential and are not overvalued. The companies selected by its subadviser are part of a proprietary group of green economy companies.
While NEXTX is not a pure alternative energy fund, it allocates a large portion to companies in the sector. Its top-five sector allocations are 14.77% industrial, 46.34% technology, 6.19% utilities and 12.14% consumer cyclical. Its top-10 equity holdings include Vestas Wind Systems A/S, Tesla, Moderna Inc, and Applied Materials. The fund has returned nearly 12% since inception with a beta of 1.26.