This Clean Energy ETF Bundles 38 Stocks Into One High Growth Bet

Core Viewpoint - The ALPS Clean Energy ETF (ACES) has shown a strong return of 38.2% over the past year, but its five-year return is significantly negative at -59.34%, indicating volatility and risk in the clean energy sector [1]. Group 1: ETF Overview - ACES is a thematic growth ETF that targets the entire clean energy ecosystem in North America, with 32% of its portfolio in Industrials and notable exposure to Information Technology, Utilities, Materials, and Consumer Discretionary [1]. - The fund has a 39% annual turnover rate, reflecting a buy-and-hold strategy, and a reasonable expense ratio of 0.55% for a thematic fund [1]. - With net assets of $117.1 million, ACES is considered smaller, which may lead to wider bid-ask spreads during volatile market conditions [1]. Group 2: Performance Analysis - ACES has outperformed the S&P 500's 12.95% return over the past year, driven by a recovery in the clean energy sector following a significant drawdown from 2021 to 2023 [1]. - Year-to-date, ACES is up 9.13%, but it has underperformed compared to the iShares Global Clean Energy ETF, which has gained 15.09% [1]. - The five-year return of -59.34% highlights the challenges faced during the rate-hiking cycle, indicating a need for recovery for long-term investors [1]. Group 3: Market Environment - The current rate environment is favorable, with the Federal Reserve cutting rates three times between September and December 2025, reducing financing costs for renewable projects [1]. - The 10-year Treasury yield is at 4.08%, down 34 basis points year-over-year, which eases valuation pressure on growth holdings [1]. Group 4: Risks and Considerations - The ETF faces policy concentration risk, as its recent momentum is largely tied to clean energy tax credits from the Biden administration, with a looming June 30, 2026 deadline creating both a catalyst and potential cliff [1]. - ACES includes a mix of profitable infrastructure operators and pre-revenue micro-cap companies, leading to significant volatility within the portfolio [1]. - The fund offers minimal income with a dividend yield of 0.46% and a quarterly distribution of $0.0911 per share as of December 2025, providing little cushion during market drawdowns [1].