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The upheaval in the energy sector

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Authors: Armin Sabeur, OPTINOVA

Date: 18. July 2022

  • Retail funds
  • Institutional funds
Armin Sabeur Armin Sabeur, OPTINOVA Source: OPTINOVA

Hardly any other industry is currently exposed to as much change as the energy sector. Whether climate change, decentralisation or the current war in Ukraine the challenges are immense, and investors must constantly reorient themselves. The OPTINOVA Conventional & Clean Energy (ISINs DE000A14N5W1 (share class I), DE000A3CWRP4 (share class R)) has specialised in the energy sector for seven years backed by an excellent track record. The portfolio’s broad diversification has so far ensured less volatility and lower periods of drawdown. Find out more in this interview with Armin Sabeur, Board Member and Portfolio Manager of OPTINOVA.

ChampionsNews: Why should investors invest in the energy sector with such a high level of uncertainty?

Armin Sabeur: For years, the energy sector has been less of a focus for investors. In our opinion this was a mistake. After all, global energy consumption has been rising steadily for decades. Despite technological progress and increasing efficiency, this will not change in the coming decades. As a driver of civilisation and progress, the energy sector should therefore be included in every balanced portfolio. Added to this is the inflation trend. Energy companies are at the beginning of the value chain and that means that increases in costs can be passed on relatively easily.

What are the specific challenges posed by the transformation that the energy sector is currently facing?

The upheaval in the energy sector began many years ago and will continue for within the next years. The key points here are the implementation of the energy transition (decarbonisation) and the digitalisation of the energy industry. Meanwhile, recent events have shown that the energy supply must be as broadly based as possible, both regionally and in terms of energy sources. In this regard, the war in Ukraine is not acting as a cause, but rather as a catalyst that is accelerating various developments in the energy industry. This has created some very attractive investment opportunities.

Are these opportunities predominately in renewable energy?

There is no doubt that the future belongs to renewable energy. However, this type of energy source is far from being available across the board, and its share will remain too small in the foreseeable future to be able to supply the world exclusively with sustainable and low-emission sources of energy. If we do not want to jeopardise the foundations of our economy, we will be dependent on well-functioning bridging technologies for a very long time. Other countries, such as France, are much further ahead than Germany in this endeavor.

Nevertheless, isn’t investing in non-carbon-neutral forms of energy a bit out of date?

According to the International Energy Agency (IEA), conventional energy sources still account for 84 percent of primary global energy demand. This reality is reflected in our fund. 72 percent of the fund is therefore invested in conventional energies (oil, gas, coal and nuclear power). The remaining 28 percent of our investments are in the alternative sector. Here we allocate to solar and wind energy, and also to companies that generate electricity through hydroelectric power plants or biogas plants. We will gradually increase our sustainability quota in the fund as soon as more companies in this segment actually operate sustainably and fulfill our strict value criteria.

The respective weighting of the portfolio components is independent of forecasts and free of the fund managers' gut feeling and is based solely on a value analysis extended by trend indicators.
Armin Sabeur

Are investments made directly in the companies that you consider promising?

Our energy fund invests systematically in equities, ETFs and ETCs. On the one hand, it offers investors the opportunity to invest directly in energy production companies and utilities, but on the other hand, conventional and clean energy also enables broad diversification through ETFs. This is important because the renewable energy segment is characterised by relatively young, specialised and small companies. ETCs also enable direct participation in rising oil and gas prices. The respective weighting of the portfolio components is independent of forecasts and free of the fund managers' gut feeling and is based solely on a value analysis extended by trend indicators.

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