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Analysis of U.S. Speciality Funds – Utilities
Frost & Sullivan, March 2010, Pages: 49
Frost & Sullivan's business and financial services group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research. A key aspect of this offering is the financial benchmarking and analysis (FBA) in the asset management space. This FBA on analysis of U.S. specialty funds – utilities discusses the trends in the U.S. specialty funds - utilities, utility industry challenges, market drivers and restraints and investment opportunities. This research service primarily focuses on open-ended mutual funds and exchange-traded funds.
This Frost & Sullivan research service titled Analysis of U.S. Speciality Funds – Utilities provides an in-depth analysis of the market drivers and restraints, industry trends, and competitive environment in addition to the challenges and issues faced by market participants. In this research, Frost & Sullivan's expert analysts thoroughly examine the following: mutual funds, exchange traded funds, and private equity.
Market Overview
Accent on Renewable Energy and Strong Regulatory Support Spur Investments in U.S. Speciality Funds – Utilities Sector
Specialty funds – utilities currently have a minuscule share (0.3 percent) as of March 2010 in the total mutual funds asset under management in the United States. Specialty funds are expected to be in the limelight in the future due to the massive investments planned in the utilities sector. There is tremendous governmental support, regulatory and technological push toward investments in the utilities sector in the United States. This is likely to attract investor interest in specialty funds – utilities, and companies in this domain are focusing on expediting efficiency and reducing costs. Adequate emphasis has been placed on investments in construction, transmission, and distribution infrastructure. According to the National Venture Capital Association, clean technology is likely to witness a 54.0 percent growth in venture capital (VC) investments in 2010. The rise of VC investments was witnessed in 2009; being a sub-sector of the energy segment, utilities will benefit from the trend. 'Escalating raw material prices are encouraging utility companies to secure energy resources and obtain upstream integration via joint ventures as well as mergers and acquisitions,' notes the analyst of this research service. 'Many changes in technology such as advanced metering infrastructure and smart grids are expected to ramp up energy efficiency.' The utility companies are also striving to enhance the productivity and value of their business operations by outsourcing their back office operations.
Although the overall market scenario looks upbeat, there are some challenges clouding the landscape. The current economic predicament has created difficulties in accessing finance. Poor economic conditions and ambiguities in project costs are discouraging investments, and investors are adopting a wait and watch approach. Moreover, uncertainty in project cost and inability to pass the costs to the consumers have deterred investments. Companies are facing a shortage of engineering procurement contracts (EPC), and many projects are bogged down by difficulties in implementation and execution. Paucity of skilled labor is another factor causing angst in the utilities sector as expanding ageing workforce is approaching retirement in the next five to ten years.
Hazy regulations have also complicated matters and issues surrounding climate change, renewable energy, and replacement of ageing infrastructure have come to the forefront. 'The U.S. Department of Energy has announced various stimulus packages and loan guarantees to encourage investments in energy efficiency,' explains the analyst. 'By the end of 2012, the U.S. government expects 10.0 percent of the total electricity generated to be renewable and 25.0 percent by 2025; this will rev up renewable energy investments.' For participants in this space, growth opportunities abound in new capacity generation, distribution infrastructure, smart metering, technological investments, and upgradation of ageing infrastructure.
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
- Mutual funds
- Exchange traded funds
- Private equity
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