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Overview
No Load Alternative Energy Mutual FundNo load alternative energy mutual funds are not yet common in the market but, with energy prices exhibiting highly unpredictable swings, the focus is shifting to alternative energies and it is only a matter of time before the market bows to the demand for funds addressing these concerns. In the meantime, a handful of pioneering alternative energy funds have entered the market and offer an opportunity to get in on the ground floor of a new energy revolution.
History
The history of no load alternative energy mutual funds is fairly recent. The two largest funds were both established in 2006 as energy prices began to skyrocket. The Guinness Atkinson Alternative Energy Fund (NASDAQ:GAAEX) was established on March 31, 2006 and is a true, open-end, no load mutual fund. The Invesco PowerShares WilderHill Progressive Energy Portfolio (AMEX:PUW) was established on October 24, 2006 and is a closed-end, exchange traded fund that is essentially no load if purchased through an online discount broker. Both funds attempt to increase shareholder value by investing in global alternative energy companies.
Significance
Alternative energy research and development is destined to become a critical factor in the global economy as fossil fuel deposits continue to diminish. American dependence upon foreign energy producers has become a major political issue. In July of 2008, billionaire oil man T. Boone Pickens unveiled the "Pickens Plan" to develop alternative energy sources including wind farms and natural gas for motor vehicles. Companies capitalizing on these innovations will be positioned for profit as alternative energies become more viable and reliable.
Function
The function of no load alternative energy mutual funds is to buy and sell the shares of alternative energy companies on behalf of the funds' shareholders to make a profit. This is easier said than done, as alternative energy companies rarely turn a profit due to their heavy research and development costs, and the sector in general is not yet viewed favorably by the investing public. Investors willing to wait for the funds to become profitable may be rewarded for their patience, though. The success of alternative energies is as inevitable as it was a century ago when petroleum supplanted coal as the energy of choice.
Size
The size of the two largest no load alternative energy mutual funds is minuscule in comparison to even the average mutual fund. The Guinness Atkinson Alternative Energy Fund is valued at less than $50 million, and the market capitalization of the WilderHill Progressive Energy Portfolio is less than $40 million. At the height of the energy crisis in 2007, both funds were worth more than double their net asset values at the end of 2008.
Potential
The long-term potential of no load alternative energy mutual funds is unlimited. One only needs to look to the size of the major oil companies to see what is possible. While that time may still be decades away, the innovators in the alternative energy field will no doubt be richly rewarded.
