man investments division rmf launches first environmental fund of hedge funds
In a breakthrough for the hedge fund industry, Swiss-based RMF Investment Management has launched a fund of hedge funds to invest purely in environment-related industries and strategies.
RMF Environmental Opportunities Fund will invest in clean technology, renewable energy, carbon and emissions trading and in water resources and infrastructure. The fund is aimed at institutional investors and will target returns of LIBOR + 8-10 percent with medium level volatility. It has been funded with USD 18.1 million proprietary capital from RMF and USD 7 million from one of RMF’s multi-strategy products.
The launch of the fund reflects the strength of interest in climate change and the demand for increased investment for development in these areas. A hedge fund of funds combines investments in a number of hedge fund managers, thereby spreading risk greatly and diversifying interests.
RMF is a core investment manager of Man Investments, the world’s largest provider of hedge fund products. By being among the very first to market such an investment fund, RMF confirms its position as an innovation leader in international hedge funds.
RMF Environmental Opportunities Fund distinguishes four sub sectors in environmental investments:
Carbon & emissions trading
(Pollution credit aggregation, carbon markets and regional greenhouse gas markets)
Water resources and infrastructure
(Reducing and preventing toxicity in water, increasing
efficiency in supply and distribution, water storage and
water rights)
Clean technology
(Clean fuels, energy storage and efficiency)
Renewable energy
(Wind, solar and biofuels)
The fund starts with six underlying managers with strategies running from equity long/short to commodities and multi strategy offerings. This will grow to 10-15 holdings. The scope of the fund is global with a discretionary balance among strategies and regions.
RMF has a long tradition of building experience in emerging investment areas and taking the initiative in evolving trading themes. It has a special team fully dedicated to research and development. RMF’s New Alternatives Group is located in New York, Switzerland and London and has five members (out of RMF’s 33 investment analysts in total).
The group has focused its investment research and development efforts on the environmental sector. This sector covers all activities that optimize the use of natural resources, reduce ecological impact, improve efficiency or arise from environmental regulation. Investments in this area concentrate mainly on the interrelationship between emission and toxicity reduction, renewable energy credits and energy efficiency.
Until recently, environmental investments were primarily of long only character with long lockup structures.
“Environmental hedge funds offer great profit potential, but the challenge for us, initially, was to find enough liquid strategies with institutional-quality managers”, said Michelle McCloskey, Head of the New Alternatives Group at RMF. “When we started looking at the market over a year ago, only a handful of these hedge funds existed. Over the past year, liquidity in both the equities and futures markets has increased dramatically and we have seen a corresponding increase in the number of fund offerings in the sector. With over 35 hedge funds to choose from, we now are confident that the market is scalable and that the managers are here to stay.”
