As the global economy continues to recover from the recent recession, the world will need more and more energy. However, the increasing demand for energy cannot be met by fossil fuels alone. Alternative energy will be an important part of the solution by helping to fill the gap between supply and demand.
An Attractive History
The performance of the Ardour Composite Global Alternative Energy Index SM, a common benchmark for the alternative energy sector, since its inception on December 31, 1999 shows that the alternative energy sector has experienced greater investment gains and losses than average market benchmarks. The chart below shows the returns of the Ardour Index from 1999 until 2010.
In both 2000 through 2001 and 2007 through early 2008, alternative energy stocks, represented by the Ardour Index (AGI), significantly outperformed the broad global stock market (represented by the MSCI World Index) and the U.S. stock market (represented by the Standard & Poor’s 500 Index) based on cumulative returns over the period since the Ardour Index’s inception.
The financial crisis of 2008 and early 2009 was particularly difficult for many alternative energy companies because many of their sources of financing for new projects dried up. However, the financial crisis may have also helped create a strong buying opportunity for alternative energy investors who believe in the sector’s long-term potential.
Performance data shown represents past performance, which does not guarantee future results. Index performance does not represent fund performance. A fund may perform significantly differently. It is not possible to invest directly in an index. Indices are unmanaged and do not reflect payment of advisory fees or other expenses associated with an investment in a fund. Ardour Global Composite IndexSM is a capitalization weighted, float adjusted equity index designed to serve as an equity benchmark for globally traded stocks principally engaged in the field of alternative energy technologies, including renewable energy, alternative fuels and related enabling technologies. Sources: Ardour Global Indexes, Zephyr.
A Bright Future
Despite the challenges presented by the recent financial crisis and economic recession, we believe the demand for alternative energy in the marketplace is here to stay and the sector’s long-term outlook is strong. According to Clean Edge, a research and publishing firm focused on the clean-tech sector, global annual revenue for three key clean-energy areas—wind power, solar power, and biofuels—climbed from $115.9 billion in 2008 to $144.5 billion in 2009 in spite of the global economic slowdown and credit crunch.
Based on the analysis by the researchers at Clean Edge, collectively these three clean-energy technologies should produce revenue of $343.4 billion by 2019, as shown in the following chart.
Revenues
© 2009 Clean Edge, Inc. (www.cleanedge.com)
An increase in clean energy revenue growth does not necessarily indicate positive investment results for a fund investing in energy or alternative energy. The energy and alternative energy sectors can be volatile. Investment involves risk, including possible loss of principal.
A Word of Caution
While we are very optimistic about the prospects for the alternative energy sector, we suggest that you keep in mind certain risks. The alternative energy sector can be significantly affected by obsolescence of existing technology, short product life cycles, falling prices and profits, competition from new market entrants and general economic conditions. The industry can also be significantly affected by fluctuations in energy prices and supply and demand of alternative energy fuels, energy conservation, the success of exploration projects and tax and other government regulations and policies. Companies in this industry could be adversely affected by commodity price volatility, imposition of import controls, increased competition, depletion of resources, technological developments and labor relations. Changes in U.S., European and other governments’ policies toward alternative energy also may adversely affect Fund performance.
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