Fund of the week: Ecofin will power through recession

Even in a falling market, the firms that generate our power and keep our water pumping should beat other stocks. After all, we can't do without these services. Yet the Ecofin Water & Power Opportunities Trust, run by Bernard Lambilliotte, has fallen 26.4%, against a 32.3% drop for the FTSE All-Share over one year. So is this utilities fund really a defensive bet?

Wins Investment Trusts believes so. There are short-term hurdles to overcome, not least falling electricity demand as the global economy slows, but Wins believes that "long-term growth in demand for energy" and "the huge investment required to make up for years of under-investment" should support the sector, says Investors Chronicle. Over half of the firms in the Ecofin portfolio are based in the UK or Europe, with around 27% in US assets, such as ITC Holdings. This is a holding firm that invests in other firms involved in electricity transmission projects across America. That should put it in a good position to benefit from Obama's plans to boost the economy through national infrastructure, says Ecofin.

While 70% of its holdings are in electricity firms, they're not all big utilities like British Energy. It recently took a 10% stake in Hansen Transmissions, which makes gearboxes for wind turbines and has contracts with four of the biggest global wind-turbine manufacturers. Gearboxes are highly customised, so for a wind-turbine maker, changing suppliers is a costly and time-consuming business. That means Hansen should be fairly resilient to a slowdown in the sector, given the high barriers to entry. Trading on a discount of 7.7%, and yielding 3.8%, the fund looks good value.

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Ecofin Water and Power'stop ten holdings