EIC Energy Utility Fund focusing on defensive Values during Turmoil
As index heavy weights, many utility stocks suffered under the turmoil of global equity markets. This being said, many utilities are well positioned to cope with the challenges of the near future. Stable cash flows and modest leverage is the convincing response to economic downturn and credit crunch.
As illustrated with our top ten holdings, the EIC Energy Utility Fund is positioned to capture the defensive qualities of the industry.
Moving into Q4 2008, the Investment Committee of the EIC Energy Utility Fund has decided to shift the fund’s exposure towards the following investment themes:
(i) We seek exposure to utilities, which do not need to access financial markets in the near future.
(ii) We invest in utilities, which operate infrastructure assets with regulated returns.
(iii) We overweight utilities, which are able to deliver on currently attractive dividend yields.
As a footnote to the above, it is notable that power prices are not following the general trend towards lower commodity prices. As an example, German baseload contract for 2009 is still around 25% higher than beginning of the year.