Fund Profile

Impax Environmental Markets 29 September 2022

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

IEM offers exposure to a diverse range of environmental themes from renewable energy to water treatment via a relatively concentrated portfolio of small and medium-sized listed companies. Impax is a pioneering manager in this space and the three co-managers of this trust are highly experienced. They use their specialist knowledge to identify companies that can benefit from what they see as structural growth drivers.

The trust had performed exceptionally well in recent years but the NAV has, more recently, pulled back as market leadership has switched from the growth-style companies in which the trust invests, to more value-orientated ones (see Performance). The managers have used this period to rotate out of certain areas which have performed well, into areas that have good prospects but which aren’t being reflected in valuations. This is discussed in Portfolio.

In the past year, IEM has slipped back from a premium valuation in two ways. Firstly, the underlying portfolio companies themselves have moved back in line with broader markets. Secondly, the trust itself has moved from a sizeable premium to a small discount on occasion.

This period of better relative value has coincided with a potential strengthening in the long-term prospects for many underlying businesses. The current heightened geopolitical and macro issues hitting the headlines today are supportive for many of the longer-term themes in the portfolio, namely energy efficiency and renewable energy.

Analyst's View

IEM offers long-term exposure to secular growth themes around environmental solutions, themes that are at the top of the agenda for many governments, businesses and consumers alike. The managers are highly experienced in this space, which, in our view, adds to the credibility of the trust given the uncertain economic outlook. Many growth investors have moved into this space in the past couple of years as it has become increasingly en vogue but IEM’s managers, with near unrivalled depth and breadth of knowledge, should give investors the reassurance that they have seen throughout many cycles before.

Most importantly, in our view, the manager’s valuation-led approach to growth investing offers a differentiated exposure. The team’s activity year to date (see Portfolio) illustrates how the team try to stay ahead of the pack. Longer-term, we see many of the themes IEM is exposed to as those that really have the capability to deliver.

Historically, IEM’s shares have traded on a premium and the underlying companies have been expensive versus the market due to this increased popularity. However, this has unwound this year (see Discount). The trust has even moved to a discount on occasion, offering a potentially rare value opportunity.

Bull

  • Trust offers long-term growth exposure with specialist management
  • Base case for underlying drivers of the portfolio has been reinforced
  • Premium, on both portfolio to the market and on the trust itself, has come down considerably

Bear

  • Trust has exposure to industrials and cyclicals which leaves exposure to an economic slowdown
  • Investment style has become out of favour as market focus has shifted to value
  • Smaller companies are often higher risk in market sell-offs
Continue to Portfolio

Fund History

13 Mar 2024 Roller coaster ride
Thematic funds have seen significant outflows over the past two years…
14 Feb 2024 Rise of the Machines
We look at some potentially exciting technology themes outside of the AI realm and share ways for investors to gain exposure without the hefty price tag…
08 Dec 2023 Fund Analysis
IEM’s portfolio is cheap, and its shares trade on a wide discount…
12 Apr 2023 Fund Analysis
The drivers for IEM’s portfolio have been reinforced by changing government, business and consumer support…
30 Mar 2023 What I’m doing with my allowance this tax year
Two of our analysts debate whether to invest in punchier funds for the long term or take a more cautious view…
29 Sep 2022 Fund Analysis
IEM’s underlying drivers have been reinforced, yet its premium valuation has crumbled, offering a compelling opportunity...
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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