Fund Profile

BlackRock Energy and Resources Income 14 December 2023

Disclaimer

This is a non-independent marketing communication commissioned by BlackRock. 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.

Overview
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Overview

BlackRock Energy & Resources Income (BERI) invests on a global basis. In our view, the trust’s prospects were transformed in 2020 by the inclusion of a specific energy transition sleeve to the portfolio. This change opened up a huge range of investment opportunities for the trust, but from a portfolio construction perspective, it also allows for a more balanced portfolio in terms of growth, income, and value factors.

As we discuss in the Performance section, this change—embraced by the managers—came at an opportune time. However, the team have continued to add value through a dynamic and valuation-led approach to asset allocation between each of the three sectors. There are no set target allocations between energy, mining, and transition stocks, and BERI has been a beneficiary of traditional energy companies’ strong performance.

At the current stage, we think it interesting that the managers are becoming more optimistic about energy transition companies. With the vicious pullback in valuations, Tom says the team are finding that they do not need to go down the market capitalisation range to find energy transition businesses with durable moats and strong intellectual property at attractive valuations. Many high-quality business valuations have been pulled down with the average, and so the team are starting to dip their toes back into the water.

The managers have been consistent in their moderate use of gearing and the trust offers a dividend yield of approximately 4% (see Dividend section). The new mandate and wider investment opportunities, along with the strong performance record saw BERI’s discount narrow, but it currently trades at c. 12%, wider than the five-year average of 7.4%.

Analyst's View

BERI’s NAV trajectory since the adapted mandate underlines the advantages of the modified approach. Performance aside—which has been impressive—of interest is the lower volatility that the NAV has exhibited compared to the three indices we show in the Performance section, representing the three areas in which the managers now focus. As portfolio theory dictates, adding less correlated assets to a portfolio can materially enhance risk-adjusted returns. As such, we continue to see the change in the mandate as a positive step.

As we discuss in the Portfolio section, we think it interesting that the managers are now more positive on the energy transition theme, with valuations having fallen significantly. We believe the managers have demonstrated their ability to generate alpha by adeptly shifting the portfolio between mining, energy, and energy transition stocks. We also believe that BERI continues to offer a solid income proposition, with solid revenue reserves and a board seemingly committed to supporting the dividend at the current level.

Trusts which have a relatively narrow theme or exposure can experience rapid shifts in sentiment, at times leading to a discount quickly appearing. These risks always need to be borne in mind, and BERI’s own history proves this point as we illustrate in the Discount section. That said, the discount to NAV is now at 12%, which compares to the five-year average of 7.4%, and this may be an interesting time to consider the trust.

Bull

  • Attractive prospective dividend yield of approximately 4%, supported by strong revenue reserves
  • Active management has helped trust to deliver strong absolute and relative total returns since evolution of strategy
  • OCF has reduced to 1.13%, thanks to growth of trust

Bear

  • Specialist mandate means BERI is less diversified than generalist equity income funds/trusts
  • Discount could widen out yet further if sentiment towards mining or energy sector fades
  • Gearing can exacerbate downside
Continue to Portfolio
2024 Kepler Growth Rated Fund

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Fund History

31 May 2024 BlackRock Energy & Resources Income Trust: A Look Ahead for 2024
The remainder of 2024 looks set to be volatile, with geopolitical tensions and a major election in the US likely to create noise. The energy sector is always vulnerable to short-term shifts in sentiment and changing views on the outlook for global growth, but the long-term trends are strong, as demand expands and supply remains constrained...
24 May 2024 Don’t fight the Politburo
We ask whether copper’s sharp rally can continue…
29 Apr 2024 Fund Analysis
BERI has raised its dividend target as secular tailwinds gather…
15 Mar 2024 European momentum and a China alternative
We take a look back at the highlights of this week’s event…
06 Mar 2024 Gimme shelter
Growth opportunities to re-invest those magnificent profits into...
12 Mar 2024 BlackRock Energy & Resources Income
Mark Hume
Rewatch this webinar as part of our month-long online series 'Themes for your ISA in 2024' hosted by the team at Kepler Trust Intelligence throughout March...
Watch Recording
01 Feb 2024 Results analysis: BlackRock Energy and Resources Income
BERI has been building up exposure to cheap energy transition companies…
01 Feb 2024 Bring some yin-yang into your portfolio in 2024
Inherent contradictions within portfolios can give them stability in a polarised world...
17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
14 Dec 2023 Fund Analysis
BERI’s managers are once again adding to energy transition stocks…
12 May 2023 The year ahead in natural resources
2022 saw an acceleration of the energy transition, as the war in Ukraine prompted a wholesale re-evaluation from governments of the way they source and use energy, says Mark Hume, manager of the BlackRock Energy and Resources Income Investment trust.
17 Mar 2023 A feast for your ISAs – the second course
Dividends, UK small caps, energy and more…
16 Mar 2023 BlackRock Energy & Resources Income - targeting the heart of the global economy
Tom Holl
Rewatch this webinar from our month-long online series 'A feast of ideas for your ISA' hosted by the team at Kepler Trust Intelligence throughout March...
Watch Recording
08 Mar 2023 The next supercycle
Our research suggests a structrual tailwind could support the prospects for commodities throughout the next decade...
06 Mar 2023 Fund Analysis
BERI offers a pragmatic and realistic approach to the net-zero investment theme…
10 Feb 2023 Results analysis: BlackRock Energy and Resources Income
BERI has had another strong year with the share price more than doubling over the past two financial years…
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
04 Nov 2022 The future of the energy market
The energy sector has been weaker in recent months as investors have started to anticipate significantly weaker global growth. Cyclicality has been a persistent feature of commodity markets and they will not be immune in an economic downturn. However, recent weakness in the energy sector is obfuscating some very important structural issues. Such is the tightness in global energy markets and we believe the outlook is becoming increasingly constructive, says Mark Hume, co-manager of the BlackRock Energy and Resources Income Trust plc...
06 Jul 2022 Fund Analysis
BERI appears to be riding the crest of a wave…
29 Jun 2022 Reality check
Advocates of a green revolution have had a tough ride in recent months as 'dirty’ energy stocks have rebounded sharply, underlining the need for an environmentally conscious approach which follows both the head and the heart…
17 Jun 2022 The three key changes in the energy sector for the year ahead
The way countries source energy is under scrutiny as the Ukraine crisis has exposed the vulnerability of supply. Mark Hume, Co-Manager of the BlackRock Energy and Resources Income Trust plc, explains how the invasion of Ukraine is changing the energy landscape...
11 May 2022 Catch a tiger by the tail
As inflation bites harder than it has for decades, we consider the best ways for investors to hang on to their capital...
17 Mar 2022 It's the end of the world as we know it
We examine five potential themes for investors seeking long-term returns in a troubled and uncertain world...
07 Feb 2022 Results analysis: BlackRock Energy & Resources Income
BERI has had a strong year thanks to the managers’ flexible approach towards navigating the path to net zero…
24 Nov 2021 Fund Analysis
Pragmatic active management has meant BERI’s managers have navigated recent months well…
24 Nov 2021 Holding back the tears
While the final text of COP26 fell short of what many had hoped for, the writing is on the wall for fossil fuels and, from an investment perspective, the age of sustainability has only just begun…
27 Oct 2021 Gone with the wind
One of our analysts looks at the implications of the shocking rise in energy prices and the opportunities it highlights for investment trusts...
06 Oct 2021 Slides and Audio: BlackRock Energy and Resources Income
Download the presentation and listen to the audio from our 'Now that's what I call a discount!' Autumn conference on 30 September...
23 Sep 2021 Now that's what I call a discount 2021!
For the second year running we examine trusts on discounts which, in our view, don't make sense...
13 Sep 2021 The European Green deal: when macroeconomics matter
Macroeconomic factors do not normally play a significant role for stock pickers. However, says Stefan Gries, Co-Portfolio Manager on the BlackRock Greater Europe Investment Trust plc, the European Green Deal could be an exception, creating real opportunities across European markets.
09 Aug 2021 The journey to net zero
The world’s energy mix is changing, but the transition to renewables is a process that demands the coordination of all stakeholders. Investing through an evolution such as this requires a nuanced approach, says Mark Hume, Co-Portfolio Manager of the BlackRock Energy and Resources Income Trust plc...
10 Jun 2021 Green is good!
2021 will see billions dedicated to sustainable initiatives, which brings with it a host of possible investment opportunities...
27 Apr 2021 Fund Analysis
A well-timed shift of emphasis in the mandate has revived BERI’s fortunes…
24 Mar 2021 Shoot to Thrill: ISA targets for long term growth
We all intend to invest for the long-term but can often be distracted by the news...
17 Mar 2021 After the storm
We look at the outlook for dividends in the UK commercial property sector and consider how the portfolio of the future will look after COVID…
12 Feb 2021 Results analysis: BlackRock Energy and Resources Income
With a strong track record behind it, BERI offers investors the chance to capitalize on the shift to a low carbon world, while offering high levels of income…
14 Jan 2021 Get 'em while they're hot!
We review the widest discounts in the investment trust universe and look at our selection of attractively cheap trusts…
16 Dec 2020 My haven’t you grown!
How sustainability has gone from zero to hero in 2020…
26 Nov 2020 Can the energy and resources sectors protect against inflation?
Tom Holl, Co-Portoflio Manager of BlackRock Energy and Resources Income Trust plc explores the hedging potential in commodities and natural resources...
26 Nov 2020 Fund Analysis
The shift towards the energy transition is seemingly already having a positive impact on BERI’s returns…
15 Oct 2020 Nice guys finish first
ESG has moved from hippy pipe-dream to corporate mainstream, but what is it really and where do we see opportunities?
15 Jul 2020 Why stagflation is likely and how to protect your portfolio from it
Our analysis suggests a combination of cost-push inflation and economic hardship could lead to a short, but unpleasant, period of stagflation...
09 Jul 2020 The next big thing: two mega-trends that everyone should own
Tech seems to beat every other sector hands down – in both up and down markets – but nothing lasts forever. Where else should investors be looking for secular growth themes?
07 Jul 2020 Fund Analysis
Transformational changes, together with a reaffirmed dividend target, mean BERI’s discount could be an attractive entry point…
05 Jun 2020 Deep impact
Audio and presentations from our conference this week, where fifteen of the world's best fund managers described a profoundly altered investment landscape...
13 May 2020 Braving the new world
Join 15 of the UK's best known fund managers at the Kepler Trust Intelligence Virtual Summit to find out how they see the world after the pandemic...
01 Oct 2019 Natural resources - time for another look?
The natural resources sector is changing: investors may want to rethink their long-held views..
12 Jun 2019 Fund Analysis
A conviction-led approach to delivering a high income from the global mining and energy sectors...
06 Feb 2019 Income for the long haul
With 'ISA season' looming we identify investment trusts which offer long-term, dependable income streams for yield-hungry investors...
01 Feb 2019 Fund Analysis
A conviction-led approach to delivering a high income from the global mining and energy sectors...
05 Dec 2018 Surf's up
As rough markets drive share price volatility up, we use a proprietary statistical technique to highlight trusts which are on unusually wide discounts...
15 Aug 2018 Fund Analysis
A high conviction approach aiming for a strong income from the global mining and energy sectors, with a track record of outperformance – particularly in flat or falling markets...
15 Feb 2018 Fund Analysis
A high conviction approach aiming for a high income from the global mining and energy sectors with a good track record of outperformance – particularly in flat or falling markets...
29 Jun 2017 Brave new world
We find out how the outlook appears today to you, and ask the top managers in each sector, region and asset class where they see the opportunities in it...
28 Jun 2017 Fund Analysis
A predominately equity-focused portfolio offering exposure to the global mining and energy sectors which pays a significant yield...
27 Jun 2017 What's driving frontier markets?
Can political and economic reforms make a difference when it comes to looking for growth?
15 Jun 2017 Signs of continental shift
BlackRock's Stefan Gries explains what's driving opportunities in Greater Europe...
08 Jun 2017 The long game
Highlights from BlackRock Income & Growth's annual general meeting...
07 Jun 2017 The drivers behind commodities’ bumper year
Last year proved a turning point for the BlackRock Commodities Income Investment Trust as markets saw a revival. At the AGM, portfolio manager Tom Holl explained the reasons behind the shift to a more positive outlook.
05 Jun 2017 Emerging Opportunities
BlackRock's Chris Colunga discusses the advantages of emerging European countries...
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