KSC expects tenfold growth in green funds

FUND management firm Kumpulan Sentiasa Cemerlang Sdn Bhd (KSC) expects its renewable energy and environmental funds to grow by tenfold to at least US$100 million (RM315 million) over the next three years, driven by aggressive marketing and greater awareness on environmental issues.

KSC has two funds focusing on companies involved in businesses that help make the earth live longer, namely Asian Renewable Energy and Environmental Fund (Areef) and Renewable Energy and Environmental Fund (Reef). Currently, the funds' size stands at over US$10 million (RM31.5 million).

"We haven't marketed them aggressively because it is a learning process. Following the experience we gained from managing Areef, we are more comfortable managing the funds now. So, from now onwards, we can market them more aggressively," KSC director of research Choong Khuat Hock told Business Times in Kuala Lumpur recently.

It hopes to market the funds, especially Reef, to the European market, where the numbers of "green" investors is increasing. Choong hopes the demand from Europe can help grow its fund size to over US$100 million in three years.

"In Europe, there are US$8 billion- US$10 billion (RM25.2 billion-RM31.5 billion) (green) funds," he explained.

KSC's AREEF has shown encouraging results so far. Areef investors have seen a return of more than 20 per cent in 2007 since its launch in March. The benchmark index rose about 20 per cent between March 2007 and December 2007.

Among notable "green" mutual funds and "green" exchange-traded funds include New Alternatives Fund, the Guinness Atkinson Alternative Energy Fund, PowerShares WilderHill Clean Energy fund, the PowerShares WilderHill Progressive Energy fund, the Market Vectors Global Alternative Energy fund, and the First Trust NASDAQ Clean Edge US Liquid fund.

Areef, which was launched a year ago, invests in environmental companies based in Asia. Reef, which was launched in April, invests in companies in Asia as well as other regions.

"Areef is a ringgit-denominated fund, making it more suitable for Malaysian investors. Reef, which is a US dollar-denominated fund, is mainly targeted at foreign investors," said Choong.

The Areef and Reef - which mainly invest in renewable energy stocks like Sunpower, Suntech and Q-Cells - is expected to benefit from the increasing solar market.

China's largest solar-power module maker Suntech Power Holdings Co recently said the global solar power market may expand by as much as 40 per cent, driven by rising demand for cleaner power generation. Growth may hit 50 per cent were it not for a shortage of polysilicon, a key component in photovoltaic panels.