Top 10 ICLN Holdings
Is ICLN under active management?
The Global Clean Energy ETF is a passive product that optimally tracks the S&P Global Clean Energy Index. The iShares line of passive tracker funds is widely regarded as offering excellent value for money. The Global Clean Energy ETF, on the other hand, is more expensive, with a 0.46 percent annual charge. This is still a long way from some of the actively managed renewable energy funds, but it is an outlier in iShares’ own portfolio.
Looking back, the Global Clean Energy ETF was founded before the financial crisis, implying that its overall performance has been dismal. Since commencement, the performance has been -69.85 percent as of December 31st, 2019. The one-year performance, on the other hand, is 43.81 percent. The three-year performance is currently at 58.33%.
Concerns about COVID-19 and the impact this epidemic is having on markets around the world have dragged down the price. We can see exposures to many locations because this is a worldwide tracker. As of March 3rd, 2020, 11.85 percent of the fund is invested in China, 43.71 percent in the United States, and the rest is spread throughout multiple geographies. A small amount of cash is maintained as a hedge, and the index has a reasonably even mix between Utility and Energy companies.
The iShares Global Clean Energy ETF offers a powerful combination of relatively high returns, significant market risk, and a strong thematic commitment. There is a small number of ETFs that try to match your investing with environmental improvement. As a result, you might have a hard time finding lower-risk options that offer the same level of investing exposure.
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What exactly is the Clean Energy ETF?
Clean energy ETFs are exchange-traded funds that invest in stocks in the alternative energy industry, which includes companies that produce solar energy, wind energy, hydroelectric power, and geothermal energy. Clean energy ETFs, like other forms of funds, may effortlessly diversify your portfolio. ETFs are also less expensive than mutual funds on average.
Is ICLN a decent exchange-traded fund?
ICLN has produced significant returns during the last few years. ICLN has annualized total returns of 39.96 percent and 25.57 percent over three and five years, respectively. To put things in perspective, QQQ’s annualized total returns over the last three and five years have been 36.27 percent and 28.51 percent, respectively.
Three primary themes have given clean energy stocks a big boost in recent years. First, both individual and institutional investors are becoming increasingly concerned about climate change. Second, demand for socially responsible investments (ESG/SRI) is on the rise. Third, renewable energy firms are becoming more popular, despite the fact that this sector is sometimes confused with tech boom stocks. This trend is exemplified by Tesla (TSLA).
One distinguishing feature of ICLN, and clean energy in general, is that some of the companies in the ETF’s portfolio have little in common. Enphase Energy is the largest holding, with a P/E of 75.19. Con Ed is the third largest, with a P/E of 18.02. Another feature of ICLN is that the stock selection criterion can cause significant shifts in holdings. A large number of the fund’s top ten holdings were purchased for the first time in 2021. For two reasons, this gives me pause. To begin with, this high degree of turnover (54 percent) is concerning due to the possibility for a drop in performance due to trading costs. Direct trading fees, the bid-ask gap, and trade market influences all contribute to this performance lag. To put things in perspective, QQQ has a turnover rate of 7.7%, while SPY has a turnover rate of 2%. Although it is understandable for specialized funds to have higher turnover, the level seen for ICLN appears to be fairly high.
Is there a Vanguard renewable energy fund?
Vanguard has redesigned its active energy fund, removing in-house managers and shifting the fund’s focus to renewables rather than fossil fuels.
Vanguard’s Quantitative Equity Group (QEG) no longer administers the $4.5 billion Vanguard Energy fund, according to a filing with the Securities and Exchange Commission (SEC). Wellington Management will serve as the fund’s sole subadvisor, having been a subadvisor since the fund’s establishment in 1984.
Furthermore, the fund’s expense ratios have been raised to 0.33 percent for Investor shares and 0.25 percent for Admiral shares.
The Investor share class had an expense ratio of 0.32 percent as of May 29, according to the fund’s information page, while the Admiral share class had an expense ratio of 0.24 percent.
‘In late 2020, the Vanguard Energy Fund will begin to boost its exposure to utilities equities in order to benefit from the sector’s shift away from fossil fuels and toward renewable energy sources.’ Vanguard believes that increasing the fund’s exposure to utilities companies will allow it to take advantage of a broader investment universe and better capture potential growth opportunities in renewable energy, electric transmission, and natural gas and electric utilities,’ according to a spokeswoman for the firm who confirmed the filing.
Is Fidelity investing in ETFs?
ETFs that invest in Fidelity. Our Fidelity exchange-traded funds (ETFs), which comprise active equity, thematic, factor, sector, stock, and bond ETFs, are all available for commission-free online purchasing.
Are renewable energy exchange-traded funds (ETFs) a worthwhile investment?
Green funds thrived in 2020 and are still trading at very high valuations despite losses in 2021. Clean energy funds, unlike broad market index funds, own a small number of stocks, frequently less than 50. And in certain cases, the top ten stocks account for the majority of the fund’s holdings. Furthermore, many of the sectors in which these funds invest such as solar or wind energy or electric vehicles are highly competitive and regulated.
NOT INVESTMENT SUGGESTIONS. The content is provided for educational purposes only; it should not be construed as investment advice.
What is a good Solar ETF to invest in?
QCLN, PBW, and TAN are the top ETFs based on 1-year trailing total returns. Tesla Inc., Vivint Solar Inc., and Solaredge Technologies Inc. are the top holdings for these funds, respectively.
Why is ICLN dropping?
The S&P Global Clean Energy Index has declined roughly 9% since March 1, 2021, falling short of the S&P 500’s around 3% rise (as of March 23).
So, what’s the deal with the index’s decline? One reason is a pullback in sentiment after investors bet on renewables benefiting from US Vice President Joe Biden’s climate package, which might cost $2 trillion and face fierce Republican resistance. Another reason is that the index only includes a tiny number of small-cap stocks. These are often illiquid, and a decline in one might lead others to tumble as well, especially if investors are taking profits following last year’s gains.
S&P Dow Jones Indices plans to raise the number of stocks included in the S&P Global Clean Energy Index from 30 to 100 in order to strengthen the index’s stability. In principle, this would lessen the risk of overvaluation and abrupt losses in individual holdings contaminating other stocks especially since the new additions will include larger-cap companies, as well as reweighting of current holdings.
Blackrock’s iShares Global Clean Energy UCITs ETF and the iShares Global Clean Energy ETF are the two largest clean energy ETFs that track the index. INRG has lost over 10% of its value in the last month, while ICLN has lost over 11%.
The decision to include more equities in the index should reduce the volatility of ETFs like INRG and ICLN, which would be excellent news for investors who have suffered significant losses. For everyone else, it could give them more confidence that investing in clean energy ETFs is a safer bet, even if massive outsized growth is no longer a factor.
This isn’t a quick cure, though. According to ETF Stream, a report from Société Générale identified some of the issues with the redesign.
One difficulty is selling some of the small-cap companies, which could be difficult due to their lower liquidity compared to larger equities. The other issue is the index’s eligibility standards, with Société Générale claiming that the parameters for clean energy exposure were unclear. This is especially troubling, according to ETF Stream, because additional holdings will be “non-pure-play energy equities,” raising concerns about how diluted the index will become.
In an article for Seeking Alpha, Chris Lau warns against buying momentum without first checking the fundamentals. Clean energy companies, according to Lau, have been hurt the hardest by the latest selloff since they “existed for decades by selling stock and never turning a profit.”
According to Lau, the bubble has finally burst, citing Plug Power and FuelCell Energy as instances. Plug Power’s stock has dropped 24 percent in the last month after it was forced to restate profit records dating back to 2018. It is also ICLN’s largest holding, accounting for 8% of the fund.
FuelCell Energy recently reported a $46.8 million deficit and was forced to sell stock to “repair its financial base.” Despite the fact that FuelCell is growing into new geographic markets, Lau says the company’s “market share gain will be accompanied with rising costs that surpass the rate of revenue growth.”
According to our thematic ETF screener (as of the March 24 close), the clean energy investing theme has dropped 16.49 percent in the last month and is up only 2.66 percent for the year.
The iShares Solar ETF, which has lost 7.74 percent in the last month, is the worst performer among the clean energy ETFs tracked by the screener. The best performer among the eight ETFs examined is the Invesco WilderHill Clean Energy ETF, which is down 1.27 percent year to date, roughly in line with the S&P 500’s 1.17 percent drop.
Is the future for clean energy stocks bleak? Despite the recent dip, the investment topic recently led our ETF leader board, increasing by 2.35 percent, while the associated solar theme increased by 2.27 percent.
Clean energy is clearly still a priority for some investors, and it is a trend that could gain traction in 2021. The Biden administration has set aside significant renewable energy funding in the approaching $3 trillion infrastructure plan, which is one of the tailwinds. Renewable energy sources “are set to account for 95 percent of the net increase in global power capacity through 2025,” according to the International Energy Association, which released a report at the end of last year.
Renewable energy sources are the way of the future in terms of energy. Given recent attempts to clean up the clean energy index and related ETFs, this could result in a more reliable and less volatile investment opportunity. To avoid getting burned, investors should keep an eye on specific tiny caps that aren’t yet profitable.