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) seeks to invest in companies which will profit from the transition to a more sustainable economy; a concept that is now firmly accepted but has not always been.

Underpinned by strong earnings growth from the underlying portfolio, NAV performance has been strong historically. Over five years the trust has delivered NAV total returns of 82%, compared to the MSCI ACWI total return of 70.7%.

2020 has been something of a rollercoaster ride, and IEM has not been exempt from the impact. The managers note that the trust’s underperformance during February and March was due largely to small and mid-cap exposure; but also to cyclical exposures in locked down industries, especially automotive, as well as underweight healthcare and the US dollar. Positives have been the exposure to renewables, software and energy efficiency.

As we note in the Portfolio section, lessons learned from managing the trust over the past 18 years have enabled the team to hold their nerve in the volatile conditions, and helped the trust to rebound more strongly than the market. IEM’s portfolio has a definite growth bias. However the managers are valuation-driven in their stock picking approach. The market volatility enabled them to initiate positions in several new companies, which previously had valuations that the team considered too rich.

A combination of new holdings, as well as sticking to fundamentals, has enabled IEM to bounce back strongly – which we discuss in the Performance section. The managers believe that COVID-19 provides more long-term support for environmental protection, as demands for ‘Building Back Better’ seek to embed low carbon energy systems and cleaner air in cities.

Analyst's View

In a traditional sense, Impax Environmental Markets’ (IEM) portfolio represents a global small and mid-cap portfolio but with growth characteristics. Many of the underlying companies are very specialist, and as a result IEM offers exposures that are unlikely to be found in generalist global funds or trusts.

The central investment thesis behind IEM is that the global economy is in transition from a depletive economic model to a sustainable one; in which growth is achieved with improved social and environmental outcomes. From a sustainability perspective – as well as for investors looking for a secular growth theme – IEM offers an attractive proposition.

Strong performance from the manager, and a good alpha score over five years, mean that IEM is now trading consistently at a premium and is issuing shares (see Discount section). The trust has net assets of more than £700m, having issued shares worth >£100m year to date. The tiered fee structure should mean that the OCF will continue to edge down, as further shares are issued.

The trust’s performance over the last few months has shown the benefits of having an experienced manager who can navigate harder times. Performance has been strong both relative to both the wider equity market and the Global Investment Trust sector. The fundamental drivers which have underpinned this performance show no signs of slowing down, and this trust may appeal to long-term investors looking to add specialist expertise to their portfolios.

bull bear
Niche investment strategy, increasingly en vogue, with trust now issuing shares Portfolio tends to have higher beta, and higher volatility than the market
Strong historic underlying earnings growth gives credence to the investment thesis Structural gearing likely to exacerbate portfolio volatility
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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