BERI’s managers are once again adding to energy transition stocks…by William Heathcoat Amory




BlackRock Energy & Resources Income (BERI) invests on a global basis. In our view, the trust’s prospects were transformed in 2020 by the inclusion of a specific energy transition sleeve to the portfolio. This change opened up a huge range of investment opportunities for the trust, but from a portfolio construction perspective, it also allows for a more balanced portfolio in terms of growth, income, and value factors.

As we discuss in the Performance section, this change—embraced by the managers—came at an opportune time. However, the team have continued to add value through a dynamic and valuation-led approach to asset allocation between each of the three sectors. There are no set target allocations between energy, mining, and transition stocks, and BERI has been a beneficiary of traditional energy companies’ strong performance.

At the current stage, we think it interesting that the managers are becoming more optimistic about energy transition companies. With the vicious pullback in valuations, Tom says the team are finding that they do not need to go down the market capitalisation range to find energy transition businesses with durable moats and strong intellectual property at attractive valuations. Many high-quality business valuations have been pulled down with the average, and so the team are starting to dip their toes back into the water.

The managers have been consistent in their moderate use of gearing and the trust offers a dividend yield of approximately 4% (see Dividend section). The new mandate and wider investment opportunities, along with the strong performance record saw BERI’s discount narrow, but it currently trades at c. 12%, wider than the five-year average of 7.4%.

Analyst’s View


BERI’s NAV trajectory since the adapted mandate underlines the advantages of the modified approach. Performance aside—which has been impressive—of interest is the lower volatility that the NAV has exhibited compared to the three indices we show in the Performance section, representing the three areas in which the managers now focus. As portfolio theory dictates, adding less correlated assets to a portfolio can materially enhance risk-adjusted returns. As such, we continue to see the change in the mandate as a positive step.

As we discuss in the Portfolio section, we think it interesting that the managers are now more positive on the energy transition theme, with valuations having fallen significantly. We believe the managers have demonstrated their ability to generate alpha by adeptly shifting the portfolio between mining, energy, and energy transition stocks. We also believe that BERI continues to offer a solid income proposition, with solid revenue reserves and a board seemingly committed to supporting the dividend at the current level.

Trusts which have a relatively narrow theme or exposure can experience rapid shifts in sentiment, at times leading to a discount quickly appearing. These risks always need to be borne in mind, and BERI’s own history proves this point as we illustrate in the Discount section. That said, the discount to NAV is now at 12%, which compares to the five-year average of 7.4%, and this may be an interesting time to consider the trust.




  • Attractive prospective dividend yield of approximately 4%, supported by strong revenue reserves
  • Active management has helped trust to deliver strong absolute and relative total returns since evolution of strategy
  • OCF has reduced to 1.13%, thanks to growth of trust




  • Specialist mandate means BERI is less diversified than generalist equity income funds/trusts
  • Discount could widen out yet further if sentiment towards mining or energy sector fades
  • Gearing can exacerbate downside

See the full research on BERI here >

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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BlackRock Energy and Resources Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research

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