Why is your fund a ‘fund to watch' and how could it work in an investor's portfolio?
For two decades, electricity demand in the developed world barely moved. That period has ended. The IEA projects global data centre consumption will more than double by 2030, and the electrification of industry, transport and buildings adds further demand. Meeting it requires power that is reliable, affordable and lower in emissions, and no single energy source satisfies all three. We believe the capital needed to resolve this energy trilemma represents one of the broadest investment opportunities in decades.
The fund invests across the full value chain: raw materials such as copper and uranium; generation from nuclear, natural gas and renewables; grid equipment and transmission; engineering and construction; and the cooling and efficiency technologies that reduce consumption. It is global, all-cap and concentrated, typically holding 40-60 companies.
In a portfolio, the fund offers exposure to rising AI adoption without adding to the technology concentration most global equity allocations already carry. Industrials, utilities and energy make up the majority of the portfolio, and our holdings benefit from AI's power requirements regardless of which models or applications prevail.
We explore the scale of this opportunity and the investment implications in our whitepaper, Meeting AI's Energy Demand Sustainably.
Can you give an overview of the team running the fund and your investment process?
I manage the fund with Bobby Edemeka and Jay Saunders. Between us, we bring experience across natural resources, utilities, infrastructure and energy, with an average of 20 years at Jennison and 25 years in the industry. We draw on Jennison's broader fundamental research platform, including analysts covering industrials, materials and global equities.
Idea generation starts from a global, all-cap universe. Candidates typically derive at least 30% of revenue, capex or EBITDA from activities that help reduce global carbon emissions or support a cleaner, more reliable and affordable energy supply.
Each candidate then undergoes fundamental research covering its business model, growth drivers, valuation and sustainability characteristics. We pay particular attention to where a company sits in the value chain, because the binding constraint shifts over time, from turbines and transformers to copper, skilled labour and permitting. ESG analysis is integrated throughout, including the avoided emissions a company's products enable (Scope 4) where these can be measured.
Portfolio construction is unconstrained by sector or geography. Position sizes reflect conviction, risk/reward and the balance of exposures across our three themes: electrification, energy efficiency and lower-carbon energy.
What do you see as the big opportunities and risks for your strategy?
The opportunity is the scale of investment required to meet rising electricity demand. Data centres are the most visible driver, with industrial electrification, transport and emerging market consumption adding to it. Over the next decade, hundreds of billions of dollars, potentially trillions, will be spent on raw materials, equipment and infrastructure.
We expect the buildout to be uneven. The binding constraint differs at each stage of the value chain: gas turbine backlogs extend to the end of the decade, transformer and switchgear lead times run to several years, copper and uranium supply is tight, and permitting can add years in some regions. These bottlenecks will emerge and ease in turn, which favours a portfolio spanning the full chain over one concentrated in a single technology.
The early beneficiaries were the obvious ones: owners of clean generation and the large electrical equipment makers. We expect returns to broaden to a wider group of companies, many of them long regarded as mature, low-growth businesses that now face demand warranting a different valuation.
The principal risk is a slowdown in data centre capex, whether from tighter hyperscaler budgets or a step change in compute efficiency. Historically, cheaper compute has increased total consumption, but a pause in spending would weigh on sentiment. Some early beneficiaries already discount significant growth. Policy change, project execution and currency are further risks, and the portfolio's concentration means returns can diverge materially from global equity markets.
Can you identify a couple of key investment opportunities you are playing at the moment in the portfolio?
Grid equipment and cabling remain among our largest exposures. Transmission capacity and grid connections are now the binding constraint on new data centres and generation in many markets, and lead times for transformers, switchgear and high-voltage cable run to several years. Holdings here include Prysmian, Quanta Services and Siemens Energy.
Copper is a second opportunity, and one we think the market has been slower to price. Every stage of the grid buildout is copper-intensive, while new mine supply is held back by declining ore grades and long development timelines. Ero Copper gives us exposure to a growing producer in Brazil.
We also see value in efficiency, where every megawatt not consumed reduces emissions, frees capacity and lowers cost. As rack densities in data centres exceed the limits of air cooling, liquid cooling and advanced thermal management have become essential. Trane Technologies and Johnson Controls supply both data centres and commercial buildings.
Explore the fund to learn more about its approach to investing across the global power value chain.
For Professional Investors only. All investments involve risk, including the possible loss of capital.
In the United Kingdom, information is issued by PGIM Limited with registered office at Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR, which is authorised and regulated by the Financial Conduct Authority ("FCA") of the United Kingdom (Reference No. 193418).
RISKS
An investment in the Fund involves a high degree of risk, including the risk that the entire amount invested may be lost. The Fund is primarily designed to purchase certain investments, which will introduce significant risk to the Fund, including asset performance, price volatility, administrative and counterparty risk. The return may increase or decrease as a result of currency fluctuations. Also, the use of financial derivative instruments may result in increased gains or losses within the Fund.
There is no guarantee that the Fund will achieve its investment objective. Prospective and existing investors should carefully consider the risks involved in an investment in the Fund. In addition to reading this document, prospective and existing investors should read the Company's Prospectus, Supplement and Key Investor Information Document (the "KIID") or Key Information Document (the "KID") (collectively the "Fund Documents") and consult their own legal, tax and financial advisors about the risks of investing in the Fund. Investments are not guaranteed by PGIM, its affiliates, or any governmental agency.
Currency Risk: The value of investments in the Fund that are designated in a currency other than the base currency for the Fund may rise and fall due to exchange rate fluctuations. Custodial Risk: Assets which are traded in markets where custodial and/or settlement systems are not fully developed may be exposed to risk in circumstances where the custodian will have no liability.
Emerging Market Risk: The Fund invests in emerging markets, which may experience political, market, social, regulatory, and/or economic instabilities. These instabilities may reduce the value of the Fund's investments.
Market Risk: Investments are subject to normal market fluctuations and the risks inherent in investment in international securities markets.
Political Risk: The value of the Fund's investments may be affected by uncertainties such as international policy developments, social instability and changes in government policies. This can result in more pronounced risks where conditions have a particular impact on one or more countries or regions.
Principal Investment Strategies: There are risks associated with the Fund's principal investment strategies, including that because the Fund may invest a large portion of its assets in a single country or region of the world, the Fund's investments may be geographically concentrated, which can result in more pronounced risks based upon economic conditions that impact one or more countries or regions.
Socially Responsible Investment Risk: The Fund may achieve lower returns than an equivalent fund which does not pursue a socially responsible mandate.
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