Tag Archives: investment

Virtus Launches First Fund In Partnership With Aviva

By DailyAlts Staff Virtus Investment Partners and Aviva Investors announced their plans to collaborate on the development and launch of “multi-strategy, outcome-oriented” mutual funds back in January . Seven months later, the collaboration has borne fruit in the form of the Virtus Multi-Strategy Target Return Fund (MUTF: VMSIX ). The fund, which is expected to be just the first of several launched by the Virtus-Aviva partnership, has a very specific target: It aims to provide returns equal to those of global equities while enduring less than half the risk, as measured over rolling three-year periods. This objective is pursued through the implementation of multiple strategies of the fund’s subadvisor, Aviva Investors, which include investments in fixed income, currencies, equity, convertibles, money market instruments, ETFs, derivatives and more. “We are excited by the opportunity to provide compelling solutions for financial advisors that utilize Aviva Investors’ broad outcome-oriented capabilities,” Virtus CEO Geroge Aylward said earlier this year in a statement announcing the partnership. He also said Virtus was “particularly pleased” to work with Aviva CEO Euan Munro, whom Mr. Aylward referred to as “a pioneer in the development of liquid multi-strategy investment solutions.” Mr. Munro is part of the four-man team from Aviva charged with managing the Virtus Multi-Strategy Target Return Fund. The other managers include Peter Fitzgerald, Dan James, and Ian Pizer. “Our companies share a similar commitment to developing and offering innovative investment options by focusing on client outcomes,” Mr. Munro said, back in January. He also explained Aviva’s client-centric approach to developing well-managed portfolios, and Virtus’s ability to “effectively articulate sophisticated investment strategies” to financial advisors and their clients. To articulate the Virtus Multi-Strategy Target Return Fund’s sophisticated strategies, Virtus has produced a fact sheet and other materials outlining the fund’s three-step investment process: Develop a macro house view Bottom-up investment process dividing opportunities into three buckets: Contrarian strategies (driven by differences in Aviva’s macro view vs. the market’s); Arbitrage strategies (driven by what Aviva perceives as market mispricings); and Risk-reducing strategies (strategies intended to do well in times of market stress, including if Aviva’s views don’t play out). Combine quantitative risk modeling and qualitative assessments for construction of a portfolio with 25-35 strategies, based on a “contribution-to-risk” framework. Shares of the Virtus Multi-Strategy Target Return Fund are available in three classes: A (MUTF: VMSAX ), C (MUTF: VCMSX ), and I (VMSIX), with a management fee of 1.30% and respective net-expense ratios of 1.80%, 2.55%, and 1.55%. A- and C-class shares require a minimum initial investment of $2,500; I-class shares have a minimum of $100,000.

NRG Energy – Leading The Green Transition

Summary While NRG Energy’s conventional fossil fuel business continues to underperform, the company’s renewable business is more promising than ever. NRG Energy’s distributed solar business is growing at a rapid pace and should be a huge growth engine for the company moving forward. NRG Energy’s diversified energy portfolio should provide the company with unique advantages. The turbulent energy commodities market will likely continue to pose challenges for NRG Energy in the near-term. NRG Energy (NYSE: NRG ) clearly believes in the potential of clean energy as it has put a large emphasis on solar PV. Despite this, the majority of the company’s business is still based on conventional generation(i.e. fossil fuels), which commands ~70% of the company’s capital allocation. NRG Energy largely disappointed during its Q2 due to the underperformance in its conventional generation business, which is not so surprising given the turmoil in the energy markets. Despite the fact that the company missed on both EPS and revenue, which came in at $0.06 and $3.4B respectively, the company still has much to look forward to. Renewables currently receives ~30% of NRG Energy’s capital allocation, which is a figure that is bound to skyrocket moving forward. Although conventional generation still makes up for most of NRG Energy’s business, the company is making a rapid and smart transition to solar PV. During the Q2 earnings call, the company gave much more insight into how important it thinks solar will become. In fact, CEO David Crane even stated that “The future is going to be increasingly solar-powered and increasingly distributed.” This optimism surrounding solar PV will likely propel NRG Energy past its competitors moving forward. Ramping Up Distributed Solar PV Operations NRG Energy has put a heavy emphasis on developing its distributed solar PV business. As this is perhaps the most promising solar PV segment in the U.S., NRG Energy is definitely on the right path. During Q2, the company’s bookings nearly doubled on a YOY basis, recording 90% higher bookings. This translates into 19,410 NRG Home Solar customers as of Q2, which shows that the company is clearly building a respectable distributed solar infrastructure. Even more impressive, the company has maintained ~20% QOQ since the end of 2014. Such a promising distributed solar business places NRG Energy among the top distributed solar providers. NRG Energy still has enormous growth ahead of it as the company has barely scratched the surface of the home solar market. As the company is one of the first conventional energy companies to make a large-scale transition to solar, it has a meaningful first mover’s advantage. Not surprisingly, NRG Energy is rapidly climbing the ranks of top rooftop solar providers, even challenging the likes of Vivint Solar (NYSE: VSLR ) and Sunrun (NASDAQ: RUN ). Given that NRG Energy also has the advantage of maintaining a conventional energy business that could provide base-load generation for intermittent renewable energy sources, the company has an advantage over pure-play rooftop solar companies. Diversified Business While NRG Energy is putting a clear focus on distributed solar PV, the company is nonetheless diversified across the energy sector. This means that no matter how the future turns out, NRG Energy should be well-prepared. The company has assets ranging from wind and solar all the way to oil and gas, making it one of the most diversified energy companies in existence. As was previously stated, having both renewables and fossil fuels assets is advantageous in that fossil fuels can provide renewables with base-load generation. As renewables like wind and solar still do not have a cost-effective means of storing energy, fossil fuel assets certainly come in handy. NRG Energy is an extremely diversified energy company, with assets in nearly all the major energy markets. (click to enlarge) Source: NRG Energy Obstacles NRG Energy has all the tools to become a powerhouse in the renewable arena. While NRG Energy’s renewable prospects are looking bright, the company’s conventional business will likely continue to face some volatility and difficulties in the near-term. Given the instability in the energy markets, NRG Energy will likely continue to face difficulties moving forward. The company has seen its valuation decrease by approximately 50% over the past year alone. In the long-run however, NRG Energy is well-positioned to outperform the market. The company will also face increasingly stiff competition from the distributed solar pure plays, mainly from standout SolarCity (NASDAQ: SCTY ). While NRG Energy is indeed has an early mover’s advantage in the distributed solar industry, SolarCity is already building an unparalleled brand presence. Given that brand presence in this arena is much more important than many had expected, NRG Energy will have to make its own imprint on the market soon or risk losing market share. Given NRG Energy’s vast resources and growing infrastructure, the company is more than capable of doing this. Conclusion NRG Energy has much more room to grow at a valuation of $5.9B . While the challenging commodity market will likely continue to plague NRG Energy in the near-term, the company is making all the right moves to secure a dominant role in the long-term future. NRG Energy’s home solar business will likely push the company to greater heights, especially given how fast the distributed solar industry is growing. As the company is at the forefront of the current energy transition, it will likely reap enormous rewards as a result. Despite NRG Energy’s underperformance over the last year, the company should outperform expectations in the years to come. Disclosure: I am/we are long SCTY. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Addicted To Energy Investing, Like CRAK

Summary Refineries have been the one bright spot for oil and gas investing lately. A new ETF captures the investment trend but still requires considerable monitoring by the investor. CRAK offers both U.S. and global refiners exposure, which offers diversification but also additional information needs. I couldn’t help myself, a chance to add levity in the face of oil market woes and gyrations. Then it appeared on my radar. CRAK . No, not the “Breaking Bad” sort, but the recently launched ETF. We know how horribly the oil and gas sector has fared, save the refiners. Well now you can own a “slice” of CRAK for your energy or retirement portfolio. I acknowledge the ETF trading issues revealed in the last couple of weeks as markets took a dive, hence the slice approach to this segment for the non-fainthearted. The fund Market Vectors Oil Refiners ETF ((Pending: CRAK )) launched 8/18/2015, right in lock step with the observed trend that refiners were performing better than other energy sub-sectors. (click to enlarge) Source: here . What are drivers? One driver behind the profitability in the sector is lower oil prices. Lower oil prices result in lower input prices, which can lead to higher margins. The fund says, “Unlike other energy sector segments, oil refiners may benefit from lower oil prices if crack spreads remain attractive.” Crack spreads are the differentials between oil prices and the refined products. In the U.S., product growth have been playing a role as well. Furthermore, the U.S. Energy Information Administration (NYSEMKT: EIA ) says: (As of July EIA estimates) that refinery runs will average 16.7 million b/d from April through September and then decline slightly in the fourth quarter to 16.2 million b/d before falling further to 15.8 million b/d in the first quarter of 2016. Following the winter period of lower demand and refinery maintenance, EIA’s expects U.S. refinery runs will reach new highs next summer, averaging 16.9 million b/d in third quarter of 2016. Low oil prices are expected to keep demand for gasoline slightly increasing in 2016. Recent EIA U.S. crude production estimates suggest slightly lower production but prices are expected to stay soft longer than previously expected given overall anticipated global supply. The EIA notes in a May report that increasing U.S. shale oil production is expected to lead to a decline in crude imports, an increase in refinery runs, new investments to expand refinery capacity, and higher crude and refined petroleum product exports. This is the expectation to the year 2025 under three general scenarios: 1) Low crude production under current export restrictions (10.9 million bbl/d in 2025) 2) High crude production without export restrictions (14.7 million bbl/d in 2025) 3) High crude production with current export restrictions (14.7 million bbl/d in 2025) The cases follow, in order from left to right: (click to enlarge) About CRAK The fund tracks the pure-play index (MVCRAKTR) comprised of companies that generate at least 50% of their revenue from crude oil refining, including oil, naphtha and other petrochemicals. It tracks the performance of the largest and most liquid companies in the global oil refining segment. The global firms included in the tracked index come from the following countries: Another way to view these country weightings is based on their expected growth rates, or GDP. This offers an indication as to whether these segments have growth prospects within a country context. Estimates for the U.S. are 2.4% for 2015; Japan 0.8%; India 7.5%; S. Korea 2.6%; Poland 3.4% and Taiwan 3.4%, to name a few (source: The Economist, Sept. 5, 2015, p 88). Thinking about this another way, the ETF offers exposure to energy-related infrastructure in economies with reasonable growth, for now. But it’s a little more complicated than that. Specific companies included in the index: (click to enlarge) Source detail: here . Considering the five U.S. refiners – Phillips (NYSE: PSX ), Marathon Petroleum (NYSE: MPC ), Valero Energy (NYSE: VLO ), Tesoro (NYSE: TSO ) and Holly Corp (NYSE: HFC ) – let’s look at their performance at a time of rising oil prices from 2013 to the peak of July 2014, and then down. (click to enlarge) Bloomberg offers a view of Reliance Industries vs. Phillips and Valero. (click to enlarge) This table shows the performance of the tracked index in comparison with FRAK , just for grins, as of 9/09/2015. (click to enlarge) (click to enlarge) Source: here. Findings I understand the immediate appeal of a swathe of exposure to the better performing segment of the oil and gas industry. The first performance chart is no longer the whole story however, given a nearly 6% decline in the last month for CRAK’s tracker index, MYCRAKTR. Some recovery is evident from the index performance above. While I have illustrated a broad brush stroke of the dynamics related to an ETF approach and refiners, serious complexity is involved in these dynamics. For example , from the EIA: Higher demand for gasoline is supporting these margins (from years of higher distillate crack spreads followed now by gasoline). U.S. gasoline product supplied is up 2.9% through the first five months of 2015; demand is also higher in major world markets such as Europe and India so far this year compared with 2014. Total U.S. petroleum product supplied (a proxy for demand) is up 2.5% through the first five months of the year compared with 2014… (Net) exports are 19% higher this year through May. Thus, investors interested in this ETF approach need to be monitoring variables such as oil prices, crack spreads, product exports and both domestic and global economic demand forecasts, at minimum. Some suggest that refinery investment exposure belongs to the traders owing to cyclicality, and one can see why this is so. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.