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Funds eye spinoffs of alternative energy companies

Yieldcos are popping up in the portfolios of some of the most widely-held mutual funds in the US

New York

THE hunt for dividend yield is pushing US fund managers into an unproven new offshoot of the alternative energy industry.

Yield companies - commonly called "yieldcos" - are spinoffs of alternative energy companies that own assets such as wind or solar farms and pay investors dividends out of the cash flow generated by long-term contracts to sell power to utility companies. Though many investors have never heard the term, yieldcos are popping up in the portfolios of some of the most widely-held mutual funds in the US.

After a broad push into the sector, more than 900 actively managed and passive funds now own at least one yieldco, according to Lipper data. Notable buyers include the US$29.3...

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