Man’s eco-friendly hedges

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For the world: the RMF will focus on investing in renewable energy sources and infrastructure.

With increasing interest in climate change and the growth in demand for environmentally safe products, Swiss-based alternative investment firm RMF, a division of Man Group, the world's largest provider of hedge fund products, has launched a ‘fund of hedge funds' to invest purely in environment-related industries and strategies. The new fund, named RMF Environmental Opportunities, 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 14 to 16%, and according to RMF, its volatility level will be "medium".

As a hedge fund of funds, risk is spread and mitigated by combining investments in a number of funds. RMF put in US$18.1m of its own capital, while US$7m has been diverted from other assets under management. The 15-year old company currently has over US$25.4bn under management.

RMF's head of new alternative investments Michelle McClosky said that environmental investments are evolving rapidly. "Environmental hedge funds offer great profit potential, but the challenge for us, initially, was to find enough liquid strategies with institutional-quality managers. When we started looking at the market over a year ago, only a handful of these hedge funds existed."

As people around the world are becoming more conscious of the detrimental effects that humans have on the environment, businesses are catering to the eco-friendly market. RMF has focused its investment research and development efforts on the environmental sector, and are confident that investments in the sector can be turned around relatively quickly.

Until recently, environmental investments were primarily structured as long-term investments and on average do not yield profits a decade or more.

McClosky noted that "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 are now confident that the market is scalable and that the managers are here to stay," McClosky added. The brave new world of environment investment covers all activities that optimise the use of natural resources, reduce ecological impact, and improve efficiency that arise from environmental regulation.

Investments in this area concentrate mainly on the interrelationship between emission and toxicity reduction, renewable energy credits, and energy efficiency.

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