Green Energy

When will renewable energy investment trust prices recover?

While equities and bonds have taken a battering, infrastructure has become an increasingly popular asset class in the past year, with a reputation for helping investors’ fortunes while traditional strategies were busy plummeting. 

Renewable energy in particular looked attractive in an environment where energy can be sold at gas-linked prices, while production costs have remained relatively stable by comparison. The AIC Renewable Energy Infrastructure investment trust sector gained 13.7% in the year to September 20, 2022 – at which point some of these companies had begun to actually look expensive.

Fast forward a month and the picture is strikingly different. Discounts widened dramatically as the sector lost 10.3% in the month to October 15, although it recovered some of its losses at the beginning of this week following new chancellor Jeremy Hunt’s reversal of many of the elements of his predecessor’s “mini” budget.

The losses were initially triggered by the rise in gilt (UK government bond) yields, and later compounded by the government’s announcement of a revenue cap for the sector last week. Huge levels of uncertainty about interest rates and the revenue cap have added to bearish sentiment in fragile markets.

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