by Harris Roen, Editor
Roen Financial Report
June 25, 2013

Though many money managers tout the advantages of ETFs over mutual funds, actual returns tell a different story. In the alternative energy sector, investors on average would have done better putting their money in mutual funds than ETFs over the past 12 month period.

Mutual Funds

Annual returns for alternative energy MFs are excellent, up a very respectable 23% on average. Not a single MF is trading down over the past 12 months, with even the smallest gainer up over 14%. Three month returns are more variable, but are still up 4.5% on average.

Shorter term returns have all turned negative, though they are in line with recent drops in the broader market. For example, both the Dow Jones Industrial Average and S&P 500 Index are down about 4% for the week, and around 3.5% for the month.

Quarterly returns are more variable. Nine out of 12, or three quarters of the funds, are in the up column, gaining 4.5% on average for the past three months.

Exchange Traded Funds

Returns are up for the average alternative energy ETF over the past one year and three month time periods, though they range widely. 14 out of the 17 ETFs are up for the year, and all of these gainers are posting double-digit returns. The average loser, however, is down almost 30%. Though ETFs on average were up over the past three months, seven out of 17 funds, or 40%, were closed down.

The largest annual gainer is First Trust NASDAQ® Clean Edge® Green Energy Index Fund (QCLN), up over 50% for the year. This index tracking fund contains a wide array of alternative energy companies, though it is heavier to solar and efficiency stocks. Both these alternative energy sectors have been favored by investors over the past year. Even though QCLN has seen about a 7% correction off its highs back in May, it is still well below the 16 to 18 price range it reached in 2010 and 2011.

The greatest annual loss is from iPath Global Carbon ETN (GRN), down 40% for the year. This exchange traded note reflects the global paralysis in carbon markets, as European financial problems continue to dog carbon trading efforts. Having said that, GRN is up 32.5% for the month, and around 50% from its lows of mid-April. These gains likely reflect a positive reaction to new Chinese emissions trading initiatives aimed at aiding troubled carbon markets.

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