Renewable, Alternative and Sustainable Resources Fund
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Monthly report January 2012 Comment In the first month of 2012, the Craton Capital Renewable Alternative Sustainable (RAS) Resources Fund returned +9.8% and comfortably outperformed its composite benchmark index by 4.1%. The Agricultural sector which was the biggest negative contributor last month was January’s biggest positive contributor. Major crop prices continued to be volatile on the back of variable weather patterns, while perceived expectations of weaker demand for market nutrients continued to linger. Our view is that nutrient prices should still hold within current trading range with the upcoming North American spring planting season. We also think that the soft commodity prices will stay higher for longer given the powerful underpinning secular fundamentals. The main drivers of these secular themes, which are industrialisation and urbanisation, together with population growth (especially in emerging markets), also favour energy as a major investment theme. More specifically in our universe, it covers energy alternatives and solutions that are taking away from conventional sources including oil, coal and nuclear energy. Post the Fukushima accident, Japan is expected to close 89% of its nuclear capacity. In the short-term, this supply gap can only be reliably fulfilled by natural gas from LNG. Arguably, natural gas is by far the optimal solution in the long run. It emits roughly half the carbon dioxide of coal in power generation and does not have the disposal/safety issues associated with nuclear energy. It certainly comes at a higher cost but is a step in the right direction. Change is indeed happening. We are frankly excited that the energy transition from traditional sources to environmentally cleaner energy solutions is here to stay. Despite near term setbacks in terms of reduced subsidies and government support in both solar and wind, we think that the political will is omnipresent globally. Secondly, technology is rapidly bringing cost down. Logically then, the adoption becomes faster as the energy solution becomes economically accessible.
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