Recent positive momentum accelerated in February, and the strategy recorded a 4.87% total return for the month (C Accumulation GBP) as sharp declines in mid and long-dated yields across key geographies (including the UK and the US) provided the impetus for alternative income securities to strengthen. A significant majority of positions contributed positively to performance during the period.

Strength was broad-based, with significant positive returns across independent power producers, vertically integrated energy companies and regulated transmission exposures. From a listing perspective, there were no areas of softness geographically. Led by Northland Power, which posted a 18.5% gain (GBP-adjusted) and provided the greatest single contribution to return, six companies including Bluefield Solar, ERG, Terna-Rete, XPLR Infrastructure and Boralex recorded total returns in excess of 10% (GBP-adjusted) during the period. In contrast, there were no detractors of note.

Holdings in HA Sustainable Infrastructure Capital and Clearway Energy Inc. were reduced more aggressively in order to lock in gains following continued strong performance. Positions in Acciona Energias, EDP Renovaveis, Greencoat UK Wind, Meridian Energy, Terna and The Renewables Infrastructure Group were also reduced at the margins.

Although many of the power generators held within the Fund fix pricing for a significant amount of their electricity production, upwards pressure on near-term energy prices resulting from the conflict in the Middle East will be captured by the likes of Greencoat UK Wind owing to the company’s policy of retaining material levels of spot price exposure. Should the flow of tankers through the Strait of Hormuz be constrained for a protracted period such that high energy prices are sustained, many companies with in the portfolio will likely benefit from being able to fix pricing at higher levels for future periods.