As per our latest note, BERI’s managers cut ‘energy transition’ stocks when an effective COVID-19 vaccine was announced in November 2020, having already made strong positive returns since ‘energy transition’ stocks were formally introduced to the mandate, 01/06/2020. Optimistically setting the team up for a robust period performance, the Chairman remarks that the team continued to “navigate the volatility in energy prices well with well-timed shifts in exposure to the sector as prices rose and then fell. The mining sector also added positively to performance thanks to buoyant commodity prices. Losses in energy transition were widely acknowledged to wipe out these gains”. The managers are apparently positive on prospects and note that management teams in the energy and mining sectors remain well disciplined on capex.
In comparison with more purely ‘sustainability’ exposed funds, management behind BERI provides a much more pragmatic and well-rounded winds of change exposure with respect to the enormous shifts we anticipate in the global economy in next decades as it seeks to decarbonize. The numbers from the last financial year are there for all to see of the benefits of their flexible approach. The board's elevated dividend target is the cherry on the cake and appears underpinned by portfolio revenues having improved in the last year. That said, once again, if in the future you tilt the portfolio a bit more towards energy transition stocks, the portfolio yield is likely to decline significantly. The board have committed to back future dividend payments with revenue reserves and capital where appropriate.
As of this writing, its shares provide a forward dividend yield of 3.9%, and trade at a premium to NAV of 2.6%. As is evident from the results announcement, the price rating has been volatile, and will likely continue to be. The OCF will drop to 1.21% over last financial year and the board are now issuing shares, reducing the OCF further. The BERI managers have generated strong returns since the mandate change and managed well in a challenging market. This post was contributed by a team whose collective areas of expertise puts the trust in position to potentially exploit a secular theme that could benefit it for decades to come.
