2010-08-03

At the end of June we increased the fund´s exposure to the renewable energy sector. That was a good choice, given that renewable energy was the best performer in July. The broad WilderHill New Energy Index gained 3.38% in July, while MSCI World gained 1.64% during the month. The strong performance of the renewable energy sector can be attributed to low valuations and several increases of earnings estimates from analysts. Although we increased the fund´s exposure to renewable energy we remain underweight the sector, which partly explains the fund´s underperformance against both MSCI World and WilderHill New Energy Index. Palisades Global Water Index outperformed the fund too.

The biggest contributor to the strong performance of the renewable energy index was the solar sector. New installations in Germany surprised on the upside and the consensus estimate for new installations during the first six months of 2010 is now 3.5 GW which is almost as much as the installed capacity during the entire year 2009 in Germany. Further support was given to the sector by strong company reports which confirmed a strong solar market 2010: The Norwegian solar company REC reported better than expected revenue and profit; First Solar – the American manufacturer of thin film solar cells – topped expectations for sales and earnings and increased its forecast for 2010; and the German silicon producer – silicon is a very important material when producing solar cells – Wacker Chemie reported all-time high quarterly sales. The strong reports has not been reflected in share prices however because the market still worries about low visibility for 2011; a clearer view of the demand for 2011 could, in our view, trigger another rally in the solar sector.

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