Analyzing Alternative Energy Mutual Fund Performance in the Spanish Market

Investors are becoming aware of the important role of renewable energy sources for mitigating global warming, which has encouraged them to invest in alternative energy mutual funds. However, the effectiveness of such financial instruments to mobilize private investments depends on the ability of managers to increase the investors’ wealth. For this reason, this paper examines the financial performance of alternative energy mutual funds compared to conventional and thematic market benchmarks in the Spanish market. To do so, we use a sample of 42 alternative energy mutual funds. Using these sample data, we implement a Carhart (1997) four-factor model. The results show that the use of a renewable energy index or conventional indexes affects fund performance. 19.05% of alternative energy mutual funds significantly exceed the renewable energy index, while 80.95% of alternative energy funds perform similarly to the market. There is no evidence of any effect of size or operating costs on the financial performance of funds.