Fund Profile

Disclaimer

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.

Overview
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Overview

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%.

Analyst's 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
Continue to Portfolio

Fund History

30 Mar 2022 You say tomato…
Do it yourself or put it into a global fund and leave it to the experts - our analyst debate the merits of each approach...
08 Mar 2022 Fund Analysis
IEM’s very high premium has eroded, offering a potentially attractive entry point for long term investors…
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...
26 Oct 2021 Fund Analysis
Momentum behind IEM’s performance appears strong, but this is reflected in the premium rating...
10 Jun 2021 Green is good!
2021 will see billions dedicated to sustainable initiatives, which brings with it a host of possible investment opportunities...
01 Apr 2021 Fund Analysis
IEM’s valuation-led approach to growth investing has delivered strong returns through cycles...
24 Feb 2021 Dire Straits or Money for Nothing?
As discounts reach historically narrow levels across the board – our analysts debate whether a premium is a price worth paying…
04 Feb 2021 Eurovision 2021
We highlight potential opportunities within the European investment trust space…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
16 Dec 2020 My haven’t you grown!
How sustainability has gone from zero to hero in 2020…
02 Dec 2020 Fund Analysis
2020 has been IEM’s year, and the future looks bright too…
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?
26 Aug 2020 Trump v. Biden
Two of our analysts debate who will win the US election and what that means for markets…
20 Aug 2020 Weathering the storm: Impax Environmental Markets
Reporting results for the six months ending June 2020, IEM has continued to attract new investors even during the Coronavirus crisis and could soon face capacity constraints…
22 Jul 2020 A game of four quarters
Seven trusts, two quarters. Are our team still happy with their trust picks for 2020?
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?
01 Jul 2020 Fund Analysis
Strong demand for IEM’s unique offering, means it continues to issue shares and grow...
25 Mar 2020 Of mice and men
Our ‘best laid plans’ have somewhat ‘gang aglay’ since the KTI team put forward its best ideas for 2020 in early January…
02 Jan 2020 Crystal Balls
Drunk on our success in choosing funds to perform well in 2019, the team at Kepler Trust Intelligence is back at the table with a glint in its eye…
26 Nov 2019 The new frontiers in environmental markets
Impax Environmental Markets has a long track record of addressing environmental challenges - giving it a first mover advantage when it comes to new sustainable issues...
19 Sep 2019 Fund Analysis
IEM invests in companies which are helping the transition from depletive models to sustainable ones…
19 Sep 2019 Rebels no more...
Climate change and sustainability is now mainstream - so we are adding ESG analysis into all of our fund research…
03 Apr 2019 Nice guys finish first
We review the rise of ESG, its impact on investment trusts, and the various ways ESG has evolved in the trust world...
03 Apr 2019 ESG: Impact
26 Mar 2019 Fund Analysis
With global populations rising, IEM invests in companies that help humanity achieve more with less...
19 Mar 2019 Electric Dreams: The future of energy
At our first public event, three fund managers gave their insights on the future of energy and the investment opportunities in this space...
27 Feb 2019 A marathon not a sprint
Our research shows that investment trusts' structural advantages give them a significant edge for investors seeking long-term capital growth...
24 Dec 2018 Why did the chicken cross the road?
Because he was so bored of reading newspapers devoted entirely to Brexit he was hoping he’d be hit by a truck.
04 Dec 2018 Fund Analysis
Long term thinking...
04 Apr 2018 Electric dreams
We examine the growing shift toward electrical power across a broad range of industries, and the implications for investment trusts with exposure to them...
04 Apr 2018 Fund Analysis
A highly-differentiated global equity trust that benefits from the increasing focus on resource efficiency and tighter environmental regulations around the world...
05 Oct 2017 Winners and losers from tomorrow’s world
We highlight a subsection of managers and strategies which aim to identify and profit from innovative disruption in the global economy...
05 Oct 2017 Fund Analysis
A small-mid cap global equities trust positioned for the transition toward a low energy, cleaner and more efficient global economy..
17 May 2016 Why oil may never recover..
Those who believe today’s resurgent oil price is an opportunity should bear in mind that Britain was powered, this month, without burning a single chunk of coal for the first time since 1882.
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