All information is at 31 March 2012 (unless otherwise stated) and unaudited.
DATA AND PERFORMANCE
Share price (pence)
Total fund size (NAV) ( m)
Market capitalisation (m)
Management fee (%)
22nd February 2002
Number of holdings (excluding unlisted)
Reuters RIC code
IEM Net Asset Value*
MSCI World Global Small Cap**
1 month %
3 months %
1 year %
3 year %
5 year %
7 year %
* Performance data incorporates undiluted NAV until exercise of warrants on 25 June 2010
** Total return
TOP TEN HOLDINGS
Ground source heat pumps
Hazardous waste treatment
Meters and utility data
Steam based energy efficiency
Environmental & engine testing
Water control products
US and Canada
Asia ex Japan
Environmental support services
Private and other
IMPAX ENVIRONMENTAL MARKETS plc
MANAGER'S COMMENTARY (Q1 2012)
The fund performed well in Q1 and remains good value relative to the broader markets.
Equity markets were relatively buoyant in Q1, driven by renewed optimism regarding global growth, hopes of a permanent lull in the Eurozone crisis (especially following the ECB's LTRO), and signs of a positive turnaround in investor sentiment and risk appetite.
Companies announcing strong Q4 earnings drove performance, such Regal-Beloit (electric-motors, US), Vacon (power electronics, Finland) and RPS (environmental consulting, UK). M&A activity continued to be positive with Pentair (water treatment, US) performing strongly on news of a merger with Tyco Flow Control. Continued economic growth in Asia, following poor performance in 2011, drove performance of stocks in the region including Lee & Man (paper manufacturing, Hong Kong).
Weakness came from renewables, such as EDP Renovaveis (renewable IPP, Spain) and Abengoa (bioethanol and recycling, Spain) as a result of on-going regulatory uncertainty in Spain. Companies issuing poor Q4 results or profit warnings, such as Vestas (wind turbine manufacturers, Denmark) and 5N Plus (metals purification, Canada) also weighed on performance. We are maintaining our position in these companies on attractive valuations and belief that the long term story is intact.
Positioning and Outlook
We have recently completed our quarterly environmental subsector outlook and this shows fundamentals improving across most subsectors. Pollution control and construction-related subsectors are more positive on improving economic fundamentals while subsectors such as LEDs have recovered as the supplydemand balance has become more favourable for equipment and product producers.
Government policies continue to be supportive for environmental sectors particularly for energy efficiency and within Asia, counterbalancing weakness from ongoing renewable subsidy cuts. In Japan, the government's energy efficiency programme was expanded as the country continues to adjust to the post-Fukushima era. In China, a new LED-light subsidy program was introduced and 160bn Yuan in rural water infrastructure investment was announced. In the US, the EPA introduced the first greenhouse gas limits for new power plants. Regarding cuts in support for renewables, the German government finalised much anticipated solar feed-in-tariff cuts while on the plus side the US unveiled lower than feared import duties on Chinese solar equipment.
We are currently maintaining a well-diversified portfolio by subsector and geography, reflecting a balance of defensive companies with visibility on earnings and high quality cyclical holdings. Energy efficiency remains a key subsector bias.
Portfolio valuation remains compelling with portfolio PE of 15x based on NTM with 17% EPS growth. This represents a discount to global markets on a PEG ratio basis. EPS growth is reasonable following a solid Q4 earnings season, with particular strength in the top ten holdings.
The fund is positioned to perform well as the global economy continues to recover and longer term environmental themes play out.
Impax Asset Management is supportive of the UK Stewardship Code. Our full Stewardship Code statement, ESG and Proxy Voting policies and the quarterly summaries of our proxy voting activities can be viewed on:
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