An energy transition ETF could come to the rescue. Not just because of weather, politics, and the environment, but also because of a market phase that is formally known as stagflation.
A stagflation is easily explained: everything is more expensive and you are unemployed. There is no cure for this diabolical combination.
In particular, investors in ETFs of the MSCI World variety could already be put to the test. Because a stagnant global economy has rarely produced price fireworks.
But this time, too, not all sectors are likely to stagnate to the same extent. the iShares Global Clean Energy UCITS ETF (NASDAQ:AAPL) could be one of the few winners of the 1920s thanks to the energy transition.
More than double the return of an MSCI World ETF
With an MSCI World ETF you are well positioned. But the iShares Energy Transition ETF would have done much better.
Looking at the last three years, the MSCI World is up around 52% (status of this figure and all other figures: 03/21/2022). The iShares Global Clean Energy ETF was able to generate a 124% plus in the same period.
Unfortunately, the iShares Energiewende ETF is not for the faint of heart. Because most of the profitability was generated in the turbulent year 2020. The year 2021 could not keep up. In the current year alone the iShares Clean Energy ETF has outperformed the MSCI World.
This energy transition ETF doesn’t just hedge corporate risk
Despite this, the iShares Energy Transition ETF has met the basic requirements of passive investors. Because while hydrogen shares Plug (WKN: A1JA81) plunged by more than 50% in 2021, the Energy Transition ETF was able to limit the decline to a modest 17%.
High profit opportunities and manageable risk. You don’t see a combination like this very often in the ETF universe.
Especially since the ETF does not only cover business risk in this case. Also when it comes to technology, all doors remain open.
Hydrogen could be the big winner of the energy transition. Or wind power. Or solar. Energy storage could also play an important role.
It doesn’t matter which technology will be the surprise winner in the coming years: it should be among the 76 holdings in the Energy Transition ETF.
Here nothing stagnates so easily.
This complete and carefree package doesn’t come without a few bucks to swallow. The total expense ratio of 0.65% per year is certainly not a bargain. In addition, the US dollar is once again the fund’s currency.
Certainly one could turn a blind eye to the total expense ratio. After all, the iShares Energy Transition ETF strives for a semi-annual distribution.
But after 14 years of appreciation, the US dollar could slowly reach its limits. I would not be surprised if the US dollar depreciated 30% against the euro in the 2020s.
Yet there is still joy. Because the energy transition is a hot topic and it seems like it’s getting hotter every year. If you want an ace up your sleeve to beat stagflation, the iShares Energy Transition ETF could be the perfect choice.
The article This Energiewende ETF Combines Hydrogen, Wind, Solar & Storage first appeared in The Motley Fool Germany.
Stefan Naerger does not own any of the shares mentioned. The Motley Fool does not own any of the shares mentioned.
Motley Fool Germany 2022