By Annabel Brodie-Smith
I really hope you are all keeping well. Christmas was different this year but we definitely made the most of it. My brother couldn’t visit us which was sad for my 84-year old Mother and my in-laws have stayed in France for the whole pandemic as they don’t want to risk travelling. Nevertheless, we had a merry time and highlights included a jolly family Christmas quiz and some hilarious charades on New Year’s Eve. Of course, we are now all locked down due to the recent surge in this super-infectious strain of the virus. We are longing for my Mother’s vaccine to come along and you know how much I don’t enjoy home schooling while juggling work. So far so good – no emails about my son’s missing maths homework - but it’s only day 3! Despite this, we now have a Brexit deal and investment companies had a strong end to the year with the average company up an impressive 14% in 2020. The market is having a good week with the FTSE 100 up 3.5% on Wednesday. This was due to the prospect of Joe Biden launching a big stimulus package after the Democrats secured a ‘clean sweep’ of Congress and the White House, although seeing the violent siege of the Capitol was extremely distressing. This month we have decided to focus on some of the investment trends that are likely to be prominent in 2021 and beyond. Ian Cowie, our investment expert, takes a look at three investment themes - green energy, healthcare and international income – which he expects to “prove profitable in 2021.” Ian has invested in investment companies to gain exposure to these three areas. It’s well worth reading his article to find out which investment companies he’s invested in and why he thinks these trends will continue to succeed. Green energy was a dominant theme in the US election promises of Joe Biden and Boris Johnson announced “the green industrial revolution” in November. It was also key theme for the investment company industry in 2020 where investment companies investing in the Renewable Energy Infrastructure sector raised more money than any other sector. There were three new launches in the Renewable Energy Infrastructure sector raising £316m and the existing investment companies in this area raised over £1.5bn. One of the companies in the Renewable Energy Infrastructure sector which raised money last year is SDCL Energy Efficiency Income Trust. It is the first investment company to specialise in energy efficiency. Jonathan Maxwell, the manager of the company, explains that 40% of the world’s energy is used in buildings but more than half of that energy can be lost or wasted. Energy efficiency measures can make up 40% of the required energy reduction to limit global warming to 1.5° centigrade. It’s really fascinating to hear more about their portfolio such as the onsite generation system in St Bartholomew’s Hospital in London. This system provides heat and power at an efficiency level of over 80%, whereas if the energy was drawn from the grid, it would have an efficiency level of below 40%. Finally, Esther Armstrong takes a look at whether value investing has had its day. Growth investment strategies have performed well since the financial crisis whereas value strategies have struggled, but will this continue? If you need a quick reminder - there are two well-known investment strategies - value and growth. A value investment strategy is where a manager buys stocks at a significant discount to its intrinsic value, for reasons which are not justified over the longer term. A growth investment strategy is where a manager invests in growth stocks - younger or smaller companies whose earnings are expected to increase at an above-average rate compared to their industry sector or the market.
Whatever 2021 has in store and it’s already been eventful, I’d like to wish you all a healthy, happy and prosperous year.
Take care. Annabel Brodie-Smith Communications Director, AIC
