Hedge funds: Green trimmings
A growing social conscience about the environment has opened up new technologies and markets that offer hedge funds new areas in which to find alpha. But it is still a nascent area and the number of players is small. Helen Avery interviews four managers to see how they are approaching the emerging asset class.
Impax Asset Management: Shorting the non-environmentalists
Climate Change Capital: Towards a carbon hedge fund
Clean Energy Asset Management: Focusing on renewable energy
BioFinancial Corp: Creating new markets to trade in
CONCERN FOR THE environment is becoming the vogue, not just among politicians, film stars and musicians but also in the finance industry. It has led to a growth in the number of publicly listed companies providing solutions to environmental issues, and has created new markets in such areas as carbon emissions. It is fodder for hedge fund managers who are straining to find new opportunities to create alpha as traditional hedge fund strategies become increasingly crowded.
It is, however, still very much a nascent sector. There are a handful of funds of hedge funds that are running environmentally focused products but their choice of underlying managers is quite limited.
Kenmar launched its fund of environmental hedge funds at the beginning of July. It invests predominantly in absolute-return strategies but also looks at long-only and long-biased funds in alternative energy, clean energy, healthcare, environmental services finance, microfinance and water management.
Including long-only funds significantly opens up the universe of managers with which to invest.