2010-06-03

This month, we received evidence that the old expression "sell in May and go away" is still viable; the broad U.S. index, the S&P 500, lost 7,7% (in USD) during the month which was the weakest monthly performance since February 2009 and the weakest May performance since 1962! The renewable energy sector remained weak in the month and lost 7.7% (in EUR) while MSCI World dropped 2.0% during the month. The fund was overweighted the water sector in May, which contributed to the outperformance of 4.1 %-points against the renewable energy index. During the month we increased the fund's cash position as a result of the soaring market volatility.

Our view is that the renewable energy sector is burdened by three major concerns at the moment: 1) the possibility that a new climate legislation (the Kerry-Lieberman Bill) will be passed in the U.S. this year is not seen as likely by the market, 2) the low price of natural gas makes renewable energy projects less attractive, and 3) the debt crisis in Europe raises questions about the sustainability of current subsidy schemes for renewable energy projects, especially solar energy. However, the huge underperformance of renewable energy – the sector has underperformed by 36.2 %-points against MSCI World during the last 12 months - has taken down the valuation of the sector considerably, creating interesting opportunities in the long-term.

On the month's last day two weeks of climate negotiations began in Bonn, Germany, with the aim to incorporate the “Copenhagen Accord” into a global and binding agreement to reduce greenhouse gas emissions.

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