Utility investing without nuclear: Flex Utilities and Infrastructure Fund
Among our goals in managing client accounts is to maintain broad diversification among investment types, since each is expected to perform well during different stages of economic and business cycles. In investment terms, we say it’s good to include a variety of investments with a “low correlation” to the others. Utility industries are known to have a fairly low correlation with the broader stock market, so are especially useful in this regard.
Utility industries include water, telecommunications, industrial materials, and energy. The ways we produce energy have come into painful focus recently as Japan and the world deal with the consequences of the nuclear disaster at the Fukushima Daiichi nuclear plant on Japan’s northeastern coast.
At Natural Investments, we have long eschewed any investment in the nuclear energy and weapons industries. The risks to human and ecological welfare in this industry are enormous. Further, we believe that no reasonable business case can be made for investment in nuclear facilities due to the expenses involved in building and maintaining them. And with so many alternative energy sources gaining in accessibility and efficiency, nuclear simply makes no sense (see Hal’s recent post for more on this).
Fortunately, there is an excellent investment vehicle that allows us to provide our clients with exposure to the mainstream Utilities sector with no nuclear investments at all – the Flex Utilities and Infrastructure Fund (until a name change in early 2011, it was called the Flex Total Return Utilities Fund). The fund has outperformed the Russell 3000 Utilities Index over the last 1, 3, 5 and 10 years.
Many Natural Investing clients have investments in one or more alternative or renewable energy funds.
The Flex UI Fund gives clients a stake in more established utilities, such as water systems and electric utilities, as well as its high proportion (about 30%) of holdings in the growing telecommunications and internet infrastructure sector. While like many mutual funds, it’s not totally “pure,” with smaller holdings in oil and gas pipelines and exploration, we feel that it serves a valuable purpose in diversification.
The Flex Utilities and Infrastructure Fund is an example of how we as investors can direct our capital away from dangerous and dated energy technologies such as nuclear, while taking responsible steps to balance our portfolios with a mix of innovative and established industries.
This article first appeared in the Spring 2011 Natural Investments News
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