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Capital Instruments in Renewable Energy - İbrahim Halil Aslan


There are several instruments that money can be invested in the capital market. Stocks, forwards, futures and warrants are some examples of these instruments. In addition to these capital market instruments, there is one instrument called "mutual fund" that can be put aside and has some important and different features. "Mutual fund" is a system based on the fact that savings of people on this instrument are directed by professional managers by investing in various capital market instruments. The savings are evaluated by the principle of minimum risk - maximum profit.

There are also several types of mutual funds. One of them is "composite funds." Composite funds can have different definitions from country to country. In this writing, we only consider the definition done by the Capital Market Board of Turkey. It is as follows: Composite fund is a mutual fund that invests at least 80% of the portfolio in stocks, debt instruments, or lease certificates and targets the capital gain. Some composite funds generally prefer to invest in the energy sector, specifically the renewable energy sector. One of these composite funds is called the "İş Portfolio Renewable Energy Composite Fund (IKP)." One type of mutual fund is "stocks funds." A stock fund is a mutual fund that invests at least 80% of the portfolio in stocks of the partnership that is publicly traded and aims to gain capital. Some stocks funds can make a purpose of investing in the energy sector. One of such stocks funds is the "Ak Portfolio Alternative Energy Foreign Stocks Fund (AOY)." Also, there is a benefit in the warning of the fact that what will be written does not carry any suggestion or recommendation to invest in something. It is not an advertisement. It only carries the aim of informing.

Let's go into the details of Is Portfolio Renewable Energy Composite Fund (IKP) and Ak Portfolio Alternative Energy Foreign Stocks Fund (AOY). IKP fund is composed of 217.941.289 shares whose the last price per share on Friday of the 3rd week in March is 1,814547 TL. The total market value of the IKP is now 395.464.622,15 TL. AOY fund is composed of 2.793.111.288 shares whose the last price per share on Friday of the 4th week in March is 0,158667 TL. The total market value of the AOY is now 443.173.625,86 TL.

In the prospectus of IKP, it is written that at least 80% of the total fund worth is invested in stocks, depositary receipts, global depositary receipts, and private debts instruments that are issued by either the companies that are constantly operating at the renewable energy sector or the service providers operating at this field, of these companies.

In the prospectus of AOY, it is written that at least 80% of the total fund worth is invested in American Depositary Receipts (ADR), Global Depositary Receipts (GDR), and stocks of the companies that are constantly operating in the field of new, developing, clean, renewable and sustainable energy that is included in the head of alternative energy.

For IKP, price valuation always becomes about curiosity when the point comes to fair valuation. In this fund, price valuation calculated by the Fund Service Unit conducting accounting and valuation jobs of the funds is delivered to the Risk Management Unit being independent of portfolio management to be verified. Theoretical price to verify the price sent is calculated by preferring one suitable model among Black and Scholes Models, Binomial Model, or Monte-Carlo Simulation.


For AOY, the price valuation process is almost similar, but the model determining price valuation is based on Black and Scholes Models or Monte-Carlo Simulation.

In some times, when profit seems obvious to be made, more funds can be useful to gain more. In these times, the IKP fund is required to get foreign funds, such as borrowing. In the prospectus of IKP, it is specified that credit can be obtained as long as the amount of credit does not exceed 10% of the total portfolio. The details about the credit should be announced on the public disclosure platform. The process is also the same for AOY.

Getting credit can sometimes be dangerous and make the fund's job harder if it does not give expected results. If it results in a negative gain, then it means loss and becomes a risk for investors. Similarly, like almost every capital instrument, this instrument also carries some risks. Investors should take these risks into account when making decisions about investing. These risks to which IKP can be exposed are stated in the prospectus of IKP and AOY.

The summary of the performance in Turkish Lira of the fund is shown in the table below:

These gains seem to someone very satisfactory, seem to others insufficient. What the fund determines for itself to be satisfactory is also an important indicator. The comparison benchmark of the fund is determined in the prospectus of IKP as 65% S&P Global Clean Energy Net Return Index (USD) + 10 %BIST 100 Return Index + 25% BIST-KYD OSBA Fixed Index.


The comparison benchmark of the fund is also determined in the prospectus of AOY as 100% MSCI Global Alternative Energy Net Return Index (Bloomberg Ticker: NGEAE)


In conclusion, many capital instruments deal with the energy sector. Two of them are listed above, which are IKP and AOY. Many other instruments are available in the market. Energy is the new trend, and those funds that do not want to catch the opportunity closely follow this area. As energy itself becomes a new tendency, those companies interesting in the energy sector also become a source of interaction.

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