I always remember April 15th as the day we chose to remodel our New Power strategy. The remodel had nothing to do with taxes beyond perhaps trying to distract myself with a project to avoid screaming in frustration. Six years ago, today, we made the decision to rebuild our New Power strategy. The results since then have been excellent and we’re proud to show the fruits of our labor. Excellent design and execution do yield strong results in our business. This is one of those success stories.
New Power Evolution From A One Pony Show to Comprehensive Impact Strategy
Walk with me through the history of New Power.
The strategy was formally launched all the way back in 2004, March to be exact, shortly after the war in Iraq began. It seemed appropriate to launch a strategy devoted entirely to renewable energy at the time. Solar, wind and all the supporting technologies were barely a thing in the public markets. There were no alternative energy funds or ETFs. In fact, we had only 45 stocks in our universe in late 2004. It was early to stake ourselves to this new and unknown sector, but we did it anyway and managed to make some very solid returns over the next three years. In the first three years of existence, New Power gained over 19% average annual returns net of fees for a total gain of 68%. Unfortunately, despite our unbridled optimism for the future of renewable energy, it all came to an abrupt and painful end in late 2007 when we discovered that renewable energy was just another sector prone to 50% losses, just like the market. Even worse, on the other end of the bear market in 2009, we discovered that renewables and progressive energy was not participating in the new very strong bull market in US stocks. These stocks had been thrown out for dead and prices of pure play renewable energy companies including a few new Clean energy ETFs, went on to make new lows well into 2012. You can imagine our disappointment. We just had nothing to buy and sat idle watching and waiting to deploy our cash.
2013 was the kickoff of an age of innovation in the US, including corresponding new public companies. In that year, we saw the birth and a wave of mass adoption of 3D printing, cloud computing, new payment systems, electric cars, cost saving technologies in healthcare, organic foods, the “internet of things”, artificial intelligence, smart homes, smart garage, smart grid and smart city applications. We also witnessed the acceleration of cyber security and blockchain technologies. It was a tidal wave of change coming out of the depths of the great recession and we found ourselves chaffing to get involved in this new era of innovators.
By April 15th, 2013 we took the universe of innovators in all industries and filtered them on the basis of companies that were driving positive change and challenging incumbents to do things better, faster, cheaper, smarter and cleaner. We were building our own universe of companies that were having a positive “Impact” on the way we live as well as the health of our planet. This was our filter before the term “Impact investing” was even on the radar in the financial services industry. Now “impact investing” represents $3 Trillion of investor capital. Our new universe of investible options of course included renewables and progressive energy as this fits the mantra of disruptors with a positive impact. But the new universe now additionally included representative names in technology, healthcare, transportation, utilities, financial services, materials and industrials. Eureka! We now had a complete market of investment options to work with across multiple sectors. On April 15th, we added many positions to the New Power strategy that fell into the definitions of Innovators, Disruptors, Pioneers, Integrators and Facilitators. Since then, we have seen the results that we wanted to see. In the last six years, we have been lucky enough to see two waves of strong leadership from our original renewable energy (new power) sector universe. The first was short and didn’t last much longer than 2013. The second started in 2017 and continues to this day. In fact, thus far in 2019, the Powershares Clean Energy ETF (PBW) is one of the leading sectors even within the noise of enormous gains in the broad market. PBW is up +32% in just 3.5 months, more than twice the return of the US market. One more week of gains, and the sector will break out to a very notable 52 week high!
Today, we are fully invested in our New Power strategy and like the market, the strategy is poised to breakout to an all time new high. But more important is the longer-term performance over the last six years.
Since April 15th of 2013 to today, New Power generated an average annual return net of fees of 10.96%, almost exactly the same as the S&P 500 index. For those who care about putting their money into companies that are driving positive change, New Power now offers a return that matches the best of the stock market indices. In full disclosure, New Power is not risk managed like our other programs. We do not sell securities or cut exposure because market risk is high. In fact, higher risk market conditions, like those found in the market today, seem to be the best environments for our more speculative New Power strategy. New Power is already up double digits this year net of all fees and we’re very optimistic that 2019 will be another big year for this strategy.
Clients and investors are encouraged to have a piece of their portfolio in New Power but a prudent allocation is appropriate. Prudent means not more than 15% of total portfolio should be invested in New Power given the weekly and monthly volatility inherent to this strategy. Please feel free to reach out to us if you’d like to consider New Power for a portion of your portfolio.
Important note: Please see our Composite Performance Disclosure regarding any performance numbers cited in this update.
www.newpowerfund.com for more details
Cheers
Sam Jones
