2011-01-20

Despite a lackluster performance in renewable energy - the renewable energy index fell by 8.6% - the fund gained 12.9% in 2010 due to successful allocations to the cleantech and water management sectors. As a result of the relatively strong performance the fund was ranked 6th best environmental fund of 2010 amongst 22 environmental funds listed at Morningstar Sweden. The fund was also top-ranked in a study conducted by the Swedish business magazine Dagens Industri. During 2010 the fund had a lower risk than its benchmark and has, since inception (2008-06-09), a standard deviation of 15.1% compared with 17.6% for the MSCI World index.

The fund’s largest contributors in 2010 was an exposure to the so-called smart materials segment (3.1 %-points) followed by an exposure to the water sector (2.2 %-points). The fund, which is euro-denominated, also benefited from the appreciation of most of its foreign currency exposures. The U.S. dollar (2.9 %-points) and the Hong Kong dollar (1.0 %-point) contributed the most.

We believe 2011 may be a better year for renewable energy due to continued strong performance of the oil price and a recovery in natural gas prices. We also note that many companies are trading at low valuation multiples, and at the same time, we believe, the aggregated profits in the sector have troughed. However, we are very selective: the outlook for companies with large exposure to the European market will remain challenging due to high unemployment rates in many countries and continued austerity focus by governments across Europe. In the water sector valuations have come up quite a bit after a strong performance in 2010, which may lead us to cut the fund's exposure to the sector during 2011. In the cleantech sector we are bullish on the energy efficiency segment which will continue to benefit from high energy prices and ambitious government targets worldwide to reduce energy intensity of GDP.

CB Funds in 2010

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