The energy transition portfolio is a compelling opportunity, as it optimizes investments in both renewables and traditional fossil fuels.
Traditional energy sources and infrastructure are expected to continue to play a role in the energy transition for the coming decades, as renewables aren’t ready to meet demand. Investors can enhance their exposure with the energy transition portfolio, which includes the Alerian MLP ETF (AMLP ) and the ALPS Clean Energy ETF (ACES ).
Despite a very constructive policy background, clean energy ETFs have struggled in 2023. Clean energy technology tends to be very sensitive to interest rates, causing the segment to struggle as the Federal Reserve has lifted rates to a 22-year high.However, clean energy ETFs are a long-term play, with the current environment offering a good entry point for buy-and-hold investors.
Why ACES & AMLP for Investments in the Energy Transition
ACES delivers exposure to North American companies involved in the clean energy sector, including renewables and clean technology. This includes companies that provide the products and services that enable the evolution of a more sustainable energy sector.
The ETF provides exposure to a variety of clean energy segments. The segments represented include solar, electric vehicles, wind, hydro-geothermal, bioenergy, energy management and storage, and fuel cell/ hydrogen.
Conversely, AMLP tracks an index that is a capped, float-adjusted, cap-weighted composite of energy infrastructure MLPs. MLPs have shown strength in the current environment, as they have less sensitivity to commodity prices than broad energy ETFs.
Additionally, MLPs are known for offering attractive income, and distributions can be particularly attractive in volatile markets.
It’s important to highlight that not only is AMLP outperforming other funds in the energy sector, it’s also outperforming the broader market on a total return basis. AMLP is on track to outperform the S&P 500 in 2023, which would mark the third consecutive year of outperformance.
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