The credit crisis and ensuing collapse in equity markets hasn’t been especially good for the mutual fund industry (especially of the equity type). Over the weekend, I ran a search on Morningstar’s Fund Quickrank using "U.S. Stocks Funds" as a category and "Total return %: 1 Year" as a ranking field. The top-five ranked funds (as at March 20, 2009) and their performances are outlined in the table below, excluding fees. The group average, containing 9,978 funds, is -40.43%.
| Fund Name | Ticker | 1-Yr Total Return (%) |
| Gabelli ABC | GABCX | -1.52 |
| Reynolds Blue Chip Growth | BRIG | -2.01 |
| Apex Mid Cap Growth | BMCGX | -2.46 |
| Franklin Biotechnology Discovery A | FBDIX | -3.49 |
| Eaton Vance Worldwide Health Sci A | ETHSX | -4.12 |
Though the losses on these best-in-class funds pale in comparison to the 42% drop in the S&P 500 or the group average, the fact of the matter remains that most equity mutual fund investors didn’t make any money over the past year. Run the screen for three years, and the search yields only three positive names (probably only 2 after fees) with a group average of -15.69%. The five year screen looks decidedly better with several funds in positive territory, although the group average still stands at -5.19%.
For the do-it-yourself investor, some of the these numbers might not look so bad in light of how overall markets have performed. However, for the risk-averse investor who was sold steady (and relatively secure) returns over the long-run, this is less than thrilling. It’s no wonder, then, that mutual funds have been experiencing net outflows of late.
Unsurprisingly, alt energy/cleantech mutual funds have performed no better (or even worse!) than the industry as a whole, with one fund even folding this past year. This may have been enough to convince some investors that alt energy wasn’t for them.
A Diamond In The Rough?
Last week, I came across a Canadian alternative energy mutual fund that has had a stellar year throughout the morass: the Creststreet Alternative Energy Fund (CAM400). The fund is up 94% over the year ending Feb. 28, 2009, and closed up 194% in 2008.
The portfolio manager recognizes that these returns were generated when the fund was only about 12% of its current size (C$3M Vs. C$25M now) and are probably not sustainable. They were related mostly to trading rather than investing. The fund was short the Claymore/MAC Global Solar Energy Index ETF (TAN), the PowerShares WilderHill Clean Energy ETF (PBW) and PowerShares Global Clean Energy Portfolio ETF in the latter half of 2008 (PBD), which no-doubt explains some of the results.
According to the manager, the fund "will invest in anything that exploits an opportunity outside traditional, carbon-based-emitting sources of energy." That said, the fund did invest in oil&gas and even gold bullion. The fund manager claims to be targeting about 25% annually. With about 65% of fund value in cash, stock picks are being made right now so the next 12 months should tell whether the manager is as strong a stock picker as he is a trader!
This fund isn’t available to US investors. Nevertheless, given the manager’s returns over the past 12 months, I figured some of the info (and especially the stock picks) he provided in the interview I read would be of interest. The stocks are in the table below.
| Name | Ticker | TTM PE | TTM EPS (US$) | What Creststreet Says About It |
| RuggedCom | RUGGF.PK | 26.6 | 0.95 | "The maker and seller of industrial-grade routers for utility substations has strong management, can benefit from North American fiscal stimulus plans and is a potential takeover candidate" |
| World Energy Solutions | WLDE.PK | N/A | -0.10 | "The firm, which hosts online auctions for the trading of electricity contracts and carbon credits, can potentially benefit from the implementation of U.S. carbon cap-and-trade legislation in the United States" |
| Ormat Technologies | ORA | 23.6 | 1.13 | "The undisputed market share leader in geothermal power production and equipment sales should benefit from U.S. fiscal stimulus loan guarantees for renewable power production " |
| Comverge | COMV | N/A | -4.43 | "The firm sells gear to help consumers cut power use to relieve stress on electricity grids, and sells the power back to a utility. It’s not yet profitable, but has a solid cash position and are poised to experience strong sales growth resulting from subsidies targeted to utilities to improve energy efficiency" |
Besides the picks, the portfolio manager likes the smart grid and a potential cap-and-trade system as investment plays on the Obama Administration’s policies.
DISCLOSURE: Charles Morand does not have a position in any of the stocks or funds discussed above or a commercial arrangement with Creststreet.
DISCLAIMER: I am not a registered investment advisor. The information and trades that I provide here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimerhere.
Creststreet Alternative Energy Fund is amazing. I had invest an initial 1000$ in the fund not even 4 months ago and now, my investment is up to 1 069$. The only question: will it last?
That is not clear. The managing acknowledges that what he did was more trading than investing, which may work less well as volatility subsides. They are targeting 25% annually, which is very aggressive. We’ll see!