Responsible Investor

• Manager skill is likely to be a decisive factor.

The clean energy and clean tech sectors are still young and rapidly evolving, and it is very difficult for even experienced technicians or investors to keep up-to-date with new technologies and opportunities that are emerging throughout the world across these sectors.
‘Niche’ funds that track a single sub-sector allow fund managers to become experts in a particular area, develop a strong network of contacts, and enable superior access to investment opportunities. The funds with the best chances of success are likely to be those that have a clearly articulated focus that is designed to suit the experience and skill set of the manager or team and the resources at their disposal. In such a dynamic field, and one so dependent on a mix of technology, politics and economics, a team that can demonstrate an ability to correctly forecast and stay ahead of current trends has a definite head start.

• Funds are being launched by both boutique organisations, as well as large, well-established financial organisations, either directly or through affiliations.

Each organisational structure can have its advantages. For example, the backing of a large organisation can be positive as it can bring business management benefits, access to resources and access to investment opportunities. Boutique organisations on the other hand may be able to move more quickly, have greater freedom

and be less hindered by bureaucratic processes. In assessing manager ability, it is more difficult to get a true sense of how well run and controlled these smaller players are, and so investors looking to invest with a smaller organisation need to look even more closely at the management of business to consider whether the financial and management resources are stable and sufficient.

• Idea generation and implementation are crucial to the overall success of the fund.

Given the rapid increase in capital being allocated to this sector, if there is a lot of money chasing too few investments, there is the danger of a bubble being created where companies become over-valued due to immediate market conditions as opposed to long-term value creation prospects.
In our research, we found a variety of approaches to idea generation and implementation, concluding that funds that actively research the sector, source their own deals, and use their personal networks to find leads are likely to have better access to good investments than those that passively screen direct approaches, and are therefore better placed to perform in the long term.

• In portfolio construction, diversification is a key issue for investors wanting to reduce their portfolio risk.

This may be done through consideration of a mix of fund characteristics such as geographic distribution,

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