Let’s face it — it hasn’t been the best year for clean energy strategies. Rising rates, supply chain issues, and uneven demand have all taken a bite out of energy-transition-related firms. But that doesn’t mean the energy transition as a market theme has lost its long-term shine. Indeed, it instead presents an opportunity to harvest those losses and reinvest them into a sufficiently different security. In that case, investors may want to consider the ALPS Clean Energy ETF (ACES).
The fund charges a 55 basis point to track the CIBC Atlas Clean Energy Index. The strategy hasn’t been exempt from this year’s struggles, but it remains a solid option given its long-term performance. The clean energy ETF has outperformed its ETF Database Category Average over the last five years, returning 6.2% in that period. That five-year stretch included wars, a global pandemic, and significant political upheaval for its targeted U.S.-heavy market.
The strategy’s index takes a market-cap-weighting approach to firms in the clean energy industry. It looks for firms involved in the overall energy transition from renewable energy generators to fuel cell, battery, and electric vehicle developers. While it does take that market-cap approach, it applies a healthy 5% cap for individual stocks to limit risk.
One Clean Energy ETF to Another
Overall, ACE’s track record and focus on just the U.S. and Canada can make it an intriguing alternative to other clean energy funds.
For example, if an investor wants to harvest losses for a strategy like the Invesco Global Clean Energy ETF (PBD), ACES could provide an alternative. PBD charges a higher fee, at 75 bps, and may be sufficiently different from ACES given its global view. Taken together, ACES may be one to watch for investors who like clean energy but want to harvest their losses from 2023.
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