While the markets over the last quarter have not seen a rally equal to quarter 2, the sector has maintained its positive trend and the Allianz RCM Global EcoTrends Fund had positive returns, although under performed its benchmark the FTSE ET50 for the 3rd quarter.

As optimism in the stabilization of the global economic environment continued to build, quarter 3 saw a return of risk appetite to the market. We maintain our low cash position, and where profits have been taken, we continue to find new investment ideas for reinvestment.

We continue to favor the wind sector within alternative energy options. The wind sector has high barriers to entry, while offering the cheapest and easiest alternative energy solution, and in September the sector began receiving stimulus funding. The US Department of Energy and Treasury Department released more than US$500mn for renewable energy projects in September. Iberdrola Renovables, (to which our holding Gamesa Corp Techno is a supplier of wind turbines) received much of this money which was earmarked for existing renewable energy projects. We still await evidence of stimulus funding resulting in new turbine orders. Our positive sentiment proved correct, and stock selection in the sector provided the positive returns to the Fund over the quarter.

We continue to remain cautious on the solar sector; low barriers to entry in this sector have resulted in the market being flooded with unsophisticated providers, and prices driven down. Our underweight position in the sector provided the second highest positive return to the portfolio as these concerns have played out.

Our position in Outotec Oyj (a metals and mineral processing company offering environmental and energy saving solutions) provided the strongest return within the pollution control sector. The largest detractor within this sector was the Fund’s underweight to container board products company Nine Dragons Paper Holdings which had strong performance but continues to look very expensive as a holding option within the Fund and is also heavily geared to domestic Chinese consumption; we continue not to hold it.

Within the water sector, China is increasingly entrusting private companies with its raw water and waste water operations, as local municipalities need to comply with stricter quality standards but lack the knowledge to meet them at reasonable costs. This has had a positive impact on Suez Environment (held), although the positive contribution did not push it in to the top 10 for the quarter. In the US the awaited stimulus spending for new infrastructure projects has had a mixed effect, as many planned projects were put on hold to await the final allocation decision of the funds, which appears to be taking longer than anticipated. Engineering and consultancy companies active in the design of large water and remediation projects like Tetra Tech saw their stock performance under pressure because of this.

The best individual contributor to performance over the quarter came from GEA Group. GEA is a “diversified” business and one of the largest solution providers for food and energy processes. The company has divisions including thermal engineering, air treatment, farm technologies and emission control.