RMF Launches Environmental Fund of Hedge Funds

By Bill McIntosh, Senior Financial Correspondent

Wednesday, September 05, 2007 6:03:31 PM ET

LONDON (HedgeWorld.com)—RMF Investment Management, the Swiss-based fund of hedge funds subsidiary of Man Group plc, has committed $25 million to launch what it is billing as the first fund of funds investing solely in environment-related assets and strategies.

The RMF Environmental Opportunities Fund is targeting investment across four sub-sectors: carbon and emissions trading, water resources and infrastructure, clean technology and renewable energy. The fund has six underlying managers with strategies running from equity long/short to commodities and multi-strategy, though it is expected to grow to 10 to 15 holdings.

"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, in a statement. "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," she said. "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."

The fund is aimed at institutional investors and will target returns of three-month LIBOR plus 8%-10% with medium-level volatility. It has been funded with $18.1 million in proprietary capital from RMF and $7 million from one of RMF's multi-strategy products.

The New Alternatives Group is located in New York, Switzerland and London and accounts for five of RMF's 33 investment analysts. The team has focused its research and development efforts on the environmental sector.

Research focuses on activities that optimize the use of natural resources, reduce ecological impact, improve efficiency or arise from environmental regulation. The investments made by the fund will concentrate mainly on the interrelationship between emissions and toxicity reduction, renewable energy credits and energy efficiency.

The fund launch underscores the growing investor interest in climate change and the demand for increased investment for development in these areas. Until recently, Ms. McCloskey noted, environmental investments were primarily of long-only character with long lock-up structures.

The new fund is targeting institutional investors and has a $500,000 minimum investment. There is an initial one-year lock-up followed by monthly redemption.

Founded in 1992, RMF now manages more than $25 billion in assets, serving mainly institutional investors. It is headquartered in Pfäffikon, Switzerland.

BMcIntosh@HedgeWorld.com

Harcourt Launches Socially Responsible FOF

By Martin de Sa'Pinto, Senior Financial Correspondent | Wednesday, September 19, 2007


GENEVA (HedgeWorld.com)—Fund of funds provider Harcourt Investment Consulting on Nov. 1 plans to launch what it says is the first socially responsible investing-compliant fund of funds for hedge fund investors. The new fund, which has yet to be named, is being launched in conjunction with Folksam, a Swedish insurance group that has provided seeding for the venture.

Carina Lundberg Markow, head of corporate governance at Folksam, presented the new fund idea to attendees at a Harcourt breakfast held in Geneva earlier this month. Her firm has some 4.5 million clients in Sweden, and holds assets of around 20 billion euro ($27.9 billion). Harcourt manages around $5.1 billion in a variety of fund of funds products for primarily institutional investors. The new product is being developed as a response to a number of client requests.

Paul Anderlind, a Stockholm, Sweden-based managing partner at Harcourt, noted that while in a very short time investments in SRI-type funds have ballooned to $4 trillion, none of the products developed to date addresses the needs of fund of hedge fund investors "This is the first SRI fund of funds to be developed for hedge fund investors," he told HedgeWorld. "It will be aimed at principally institutional investors, but we believe it will also gain support from high-net-worth investors."

Harcourt and Folksam will both benefit from teaming up for this project. Folksam was looking to create a vehicle that would allow the firm to invest in hedge funds, and it gains access to Harcourt's experience in fund of hedge funds development and management. Harcourt, meanwhile, will look to leverage Folksam's more than 10 years' experience in the field of SRI.

At launch, the fund will invest in between 10 and 12 managers who will be sourced from Harcourt's universe of approved managers and candidate managers. These managers will be required to abide by an SRI policy that has been drawn up by Folksam. Strategies using equities or corporate bonds will be run over managed accounts, and there will be regular monitoring of these portfolios to ensure their adherence to the established SRI policy.

Harcourt has so far identified candidate funds in long/short equity, statistical arbitrage, merger arbitrage, currency CTA, fixed-income arbitrage, emerging market debt, asset-backed securities and directional sovereign debt that are willing to join the initiative. Strategies that make direct investments in companies—either equities or debt—will be subject to the regular monitoring of their portfolios.

With respect to direct investments, the Folksam SRI team will work with an independent SRI screening company. The screening process uses the MSCI World Index as its base universe and removes companies with certain types of exposure. Disallowed are investments and derivatives exposure, long or short, in firms that contravene U.N. conventions on Human rights, the environment or corruption, or those engaged in the arms, alcohol, gaming or tobacco industries. Also excluded are investments in financial futures linked to fossil fuels such as oil, gas and coal.

However, investments in "best-in-class" companies are accepted in the utilities and energy sectors. Thus, an investment would be acceptable in, for example, a power plant that produces a lot of emissions but that can demonstrate a commitment to containing and offsetting its externalities. The current investable SRI-compliant universe numbers approximately 1,500 companies.

One might conclude that this be taken a step further by hedge funds—that is to say, a hedge fund could invest in the best SRI performers (provided there were good fundamental reasons for doing so) and short the poorest performers with, say, the largest environmental impact and hence the greatest regulatory risk. Not so fast, said Mr. Anderlind. "We're not using funds that are shorting poor SRI performers," he said. The underlying funds will simply have to avoid poor SRI performers—period.

"Folksam has an excellent name in SRI issues. Folksam and Harcourt will jointly look to convince other hedge funds to improve their SRI performance," said Mr. Anderlind. "They are also helping to market the fund to other institutional investors. The more assets we can raise, the more hedge funds will see value in compliance to SRI principles." Mr. Anderlind added that interest in the new fund "has been very strong, although we haven't done any formal marketing yet."

Mr. Anderlind said a number of meetings had already been set up where Harcourt and Folksam will present the product to other institutions. He said he believes public and private pension funds could be fertile areas for the new fund, as could endowments, foundations and religious investment groups, which are beginning to gain importance in the SRI area.

The new fund, which will be domiciled in Luxembourg, targets returns of LIBOR (the London Interbank Offered Rate) plus 300 basis points. For the institutional share class, the minimum investment is $10 million, and there is an annual management fee of 1% and a performance fee of 5% for returns over the benchmark. For the regular share class, the minimum investment is $500,000, and there is an annual management fee of 1.5% and a performance fee of 10% over benchmark.

MdeSaPinto@HedgeWorld.com

HSBC launches Climate Change Benchmark Index

(From Market News Publishing, provided by LexisNexis)
Publication: Market News Publishing

HSBC Corporate, Investment Banking and Markets (CIBM) has announced the launch of the HSBC Global Climate Change Benchmark Index, together with a family of four investable global climate change sub indices - a comprehensive range of climate change indices. The HSBC Global Climate Change Benchmark Index, developed by CIBM's Global Research team, is a global reference index which has been designed to reflect and track the stock market performance of key companies that are best placed to profit from the challenges presented by climate change. The performance of the benchmark has been tracked back to 2004 and has outperformed the MSCI World Index by around 70%. From this benchmark, HSBC has established four investable climate change indices that can be used to create portfolios for a diverse range of investment needs such as long only funds, hedge funds, exchange traded funds, discretionary funds and structured products.