Impax Environmental Markets

Momentum behind IEM’s performance appears strong, but this is reflected in the premium rating...

Add to watchlist Request a meeting Download View key data

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Impax Environmental Markets. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Impax Environmental Markets
2021 Kepler Growth Rated Fund

This trust has been awarded a rating by Kepler for growth... Find out more

Impax Environmental Markets (IEM) is the standard bearer for sustainability-focussed trusts. For nearly two decades, it has offered exposure to mid- and small-cap companies exposed to the transition to a more sustainable economy. The last few years have seen what has historically been a niche area of investment finally become mainstream. IEM has ridden this wave of investor enthusiasm, reflected in both strong NAV performance relative to world equities, but also a discount giving way to a premium rating.

The Impax team are fundamental stock pickers that invest in growth companies using a disciplined investment process and a strong valuation overlay. Mindful of the risks presented by current higher valuations, they are aiming to position IEM for defensive growth. When we caught up with the managers recently, they commented that they have never been more convinced of the long-term case for their strategy.

With markets performing strongly, the team have been more active in terms of turnover than historically. The team tend to trim their exposure of more expensive holdings, recycling capital into better valued prospects. Whilst wary of overall valuations, the team report being reassured by the portfolio’s underlying earnings continuing to grow faster than the wider market. This is in line with the historical pattern, in which IEM’s portfolio has delivered stronger underlying earnings growth relative to the wider index.

Higher valuations are a factor in the managers’ reluctance to employ gearing, and IEM has net gearing of c. 1.4% currently. Investor demand for what is a capacity constrained strategy has seen the premium at which the shares trade expand to c. 5%.

Kepler View

Impax Environmental Markets (IEM)’s run of form continues, with strong outperformance of world equities so far this calendar year (2021) extending good relative outperformance achieved in 2019 and 2020.

The growing popularity of sustainability as an investment theme, combined with growing recognition of Impax Asset Management as a leader in this space with a depth of experience not found in many other managers, means that we think shares will likely continue to be in demand.

IEM invests in mid- and small-cap companies in a niche that is becoming increasingly popular. The managers and board are therefore capacity-constrained, which has led to constraints on the number of shares that can be issued. This has led to a consistent premium rating, which shows no signs of abating.

IEM offers an attractive package, but the premium to NAV of 5% does present risks over the short term. Other short-term risks also remain in the form of portfolio valuations being higher than historic averages. For long term investors, in our view IEM remains attractive as a highly differentiated proposition to most global funds and trusts.

bull bear
Niche investment strategy which has delivered strong outperformance
Portfolio trading on a higher premium to wider markets than historically
Strong historic underlying earnings growth provides evidence of manager’s stock picking skills
Exposure to industrials and cyclicals could leave IEM vulnerable to an economic slowdown
Specialist, well-resourced manager
Trading on a premium to NAV
William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

Fund History

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 70 Conduit Street, London W1S 2GF with registered number OC334771.



Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.