Funds News

Guinness Asset Management plans alternative energy fund

LONDON (Reuters) - Guiness Asset Management said on Wednesday it plans to launch an alternative energy fund for UK and European investors, which it sees benefitting from strong oil prices and from value in the sector.

Valuations of alternative energy stocks, while above the market average, did not appear too high relative to the firms’ forecast earnings growth, fund co-manager Edward Guinness said.

“At the moment we still see valuations in the realms of reasonability. Companies with 35 percent-plus growth rates, on 30-40 times earnings multiples for 2008 -- it’s not crazy. They are companies with real revenues and real earnings,” he told Reuters.

The Guinness Alternative Energy fund, to be launched next month, will invest in listed firms with a market capitalisation of more than $100 million (50 million pounds) and with at least half of their business coming from developing renewable energy generation or improving energy use efficiency.

It will be managed by Tim Guinness, who runs the $1.7 billion Investec GSF Global Energy fund, as well as Edward Guinness and Matthew Page.

“2007 has seen the fundamentals in the oil market drive prices to a new $70-$100 trading range, with a growing likelihood that in the next five years we see oil over $150. This provides huge support to the alternative energy sector,” Tim Guinness in a note.

“The scale of the challenge of moving on from fossil fuels makes this an attractive area for long-term investment.”

On Wednesday oil rose above $90 a barrel after Goldman Sachs, the most active investment bank in energy markets, said it now expects U.S. crude to average $95 a barrel in 2008, up $10 from its previous projection.

The fund will replicate a U.S.-based fund Guinness already runs and the firm plans to seed the fund with $1 million at launch and to raise $100 million in assets in the first year.

Guinness said 83 percent of stocks in the U.S.-based fund were set to be profitable by 2008.

Over the past five years the Investec GSF Global Energy fund has risen 343 percent, beating a 217 percent return from the MSCI World/Energy index.