What we invest in: US renewable energy fund, Excelsior

As I’ve mentioned in previous articles, smartMonday is focused on diversifying investments, particularly reducing sharemarket exposure given current market conditions, so one of our latest investments, in a renewable energy fund, is a perfect fit.

This year we’re beginning an investment in a North American renewable energy infrastructure fund – Excelsior Renewable Energy Investment Fund II LP – which will be allocated to our MySuper and active Choice investment options.

(A renewable energy investment fund attracts investors and allocates capital toward renewable energy projects or companies. This supports the development of renewable energy technologies and infrastructure, and allows investors to participate in the renewable energy sector.)

This Excelsior fund is based in the United States and steered by expert managers in renewable energy investments who manage other funds of this nature. Its focus is in small to mid-sized wind and solar energy generation and energy storage projects.

Wind farms are a major area of investment for Excelsior.

This sector is a strong investment opportunity because:

• recent US government policy supports the transition to a clean-energy economy, incentivising and accelerating private investment in the renewable energy sector (benefitting the Excelsior fund we’re investing in)

• wind and solar energy are forecast to make up 55% of US energy supply by 2050, meaning we can expect strong demand for the output from renewable-energy generation assets.

Not only do we expect high returns in this investment, but it’s a small step in our direction toward more unlisted alternative investments as we seek broader opportunities and more potential to increase risk-adjusted returns across our portfolio. Diversifying like this helps us manage risk from long-term inflation and volatile investment performance in other asset classes.

Looking ahead, we expect to diversify further into unlisted assets, particularly as volatility in equities and other asset classes continues – which is likely as long as inflation remains a problem. This outlook has led us to reduce sharemarket exposure across our growth-oriented portfolios, and invest more in alternatives, fixed interest and cash.

We’ll share highlights from our investment strategy, such as this Excelsior investment, as we take future opportunity to protect and build your super.

Ed Tomlinson is chief investment officer at smartMonday.