INDEPENDENT CAPITAL GROUP

Energy Champions Fund

Energy Champions Fund

Overview

In a volatile energy price environment, company positioning is critical, the focus should be to be invested in companies in a relative sweet spot. Energy companies are entering a phase of improving margins and the valuation is very low on a relative basis compared to the global equity markets. A portfolio of energy equities reduces firm specific risks while it increases the commodity exposure.

 

The White Fleet II – Energy Champions Fund is an open-end fund incorporated in Luxembourg. The Energy Champions Fund offers the investor the opportunity to participate in an actively managed portfolio of energy companies active in the oil and gas sector and this in a pragmatic sustainable way. This means considering sustainability criteria without losing sight for return. The Fund will invest its assets globally in equities or equity-type instruments of companies that explore, develop, produce and distribute energy. The Fund’s objective is to achieve long-term return.

Energy Champions Fund

Investment Case

Why commodities

Commodities have been key in the economic development of the world. The industrialisation and urbanisation of the developing world is far from complete. Urban population is expected to grow globally from 52% to 66% by 2050. Urbanisation drives per capita wealth increase and with it the demand for natural resources. The increase in average income is happening on an unprecedented scale and speed. During the next 20 years the world population is expected to grow larger and on average younger. Middle class expands on a global basis, more than doubling by 2030 to reach >5 billion people. India and China show the largest increases with each reaching more than 1 billion middle-class citizens, China alone has the potential for 250 million people to urbanise in the next 10 years. By 2030, global middle-class consumption is expected to be more than $63 trillion vs $35 trillion in 2015. Demand for commodities remains continual, while they are becoming scarcer.

Urbanization is key driver of global demand
Per capita energy consumption

Commodities are out-of-favour

At the beginning of 2016 Bloomberg Commodity Index had fallen to lowest level since 1999. High prices before the financial crisis led companies to focus on volume growth, no matter the cost. Soaring supply flooded the market and exceeded demand, sending prices tumbling. Several price shocks have eroded investor confidence. AuM in the commodity space is still very low currently. However, the typical commodity cycle is starting to turn attractive as demand is recovering, inventory are drawn and supply tightens. There are several commodities that are in deficit currently and may keep so in the medium term.

Bloomberg Commodity Index still close to a 17 year low
The commodity cycle over the last years

Why natural resource equities

Over the last few years natural resource equities underperformed heavily the global equity markets (MSCI World Index). The valuation is very low on a relative basis compared to the global equity markets. However, during the last few years natural resource companies took the opportunity to clean up the cost base and this resulted in a >40% cost deflation, much faster and higher than expected. Capex budgets came also down significantly on greater capital discipline and the shift into shorter cycle projects. There is a shift from investment mode to harvest mode as margins recovered strongly. The natural resource universe is expected to generate a record high free cash flow yield going forward. In conclusion, we may enter the sweetest stage of the cycle.

Record gap to global markets and record low valuations
Sources: UNFPA, Population Reference Bureau, CIA World Factbook, BHP Billiton, United Nations, McKinsey, HSBC, PWC, Goldman Sachs, UBS, Bloomberg, ICG Research

Energy Champions Fund

Investment Process

ICG investment process

Our investment process is based on a quantitative approach to find the best-in-class companies. The consistent methodological process, which has been backtested successfully, is non-predictive with >90% of the analysis based on historical data. Our process has a portfolio view and helps to create a balanced portfolio instead of single stock bets or market cap weightings. After defining the broad investment universe, selecting the best-in-class subsectors with the highest margins or most attractive investment opportunities, the universe is further filtered down to companies with significant subsector exposure.

ICG database

To properly analyse natural resource related companies, the ICG Investment team makes use of standardised data. We developed a proprietary data base to better analyse financial and operating figures. Extensive data is used (>160’000 data points) to analyse trends across the industry and pinpoint sector champions.

ICG Alpha Scorecard

To better measure the relative attractiveness of natural resource companies in a specific subsector we use sub-sector Alpha Scorecards to facilitate the investment decision. The ICG Alpha Scorecard is a quantitative and qualitative screening scorecard that pinpoints sector champions with strong economic «moat» based on different variables. The approach helps to identify companies with a relative good track record in different key financial and operational variables (statistically robust dependence of performance to scorecard variables). The majority of variables are based on historical figures from the last fiscal year or based on a 3 year average. The majority of variables are also dynamic. The Investment Management team selects the top 25 companies based on the ICG Alpha Scorecard ranking. All positions are equally weighted, however we may reduce the weight or even exclude a company on exceptionally events (e.g. oil spill, political risk). Monthly position update based on all instruments and rebalancing is only done if it makes sense.

Energy Champions Fund

Performance

On this website the performance is updated only monthly. But daily performance is visible on all financial portals like Bloomberg

ECF NAV & Performance

wdt_ID Share Class NAV (31.03.2020) March Year-to-Date 1 Year 3 Year Since Inception
1
2 ECF - A1 - Accumulating USD 19.1 -42.7% -60.5% -62.5% -66.1% -80.9%
3 ECF - A2 - Distributing USD 17.6 -42.7% -60.5% -62.5% -66.1% -80.9%
4 ECF - I2 - Distributing USD 172.8 -42.7% -60.5% -62.3% -65.5% -81.3%
5

Energy Champions Fund

Fund Facts

More information and documents available on fundinfo or upon request.

wdt_ID Facts ECF
1
2 Fund name White Fleet II - Energy Champions Fund
3 Investment Manager Independent Capital Group AG
4 Legal status Luxembourg SICAV with UCITS-IV status
5 Due Diligence Castle Hall Alternatives - OPS Diligence (Own DD reports available on request)
6
7
wdt_ID Facts ECF
1
2 Base currency USD
3 Launch date March 2014
4 Benchmark MSCI World Energy Sector Index Net TR
5 Custodian Credit Suisse Luxembourg
6 Administrator Credit Suisse Fund Services Luxembourg
7 Auditor PwC Luxembourg
8
wdt_ID Share classes A1 - Accumulating A2 - Distributing I2 - Distributing
1
2 Bloomberg ticker WFECHA1 LX Equity WFECHA2 LX Equity WFECHI2D LX Equity
3 ISIN LU1018863792 LU1018863875 LU1092313045
4 Valor number 23322792 23322921 25025474
5 Management fee 1.25% p.a. 1.25% p.a. 0.65% p.a.
6 Min. subscription 1 share 1 share USD 2'000'000
7 Trading frequency Daily, no lock-up, no redemption fees Daily, no lock-up, no redemption fees Daily, no lock-up, no redemption fees
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