January 9, 2008
After six months of marketing its energy hedge fund to institutional investors, Houston-based ETG Capital this week launched its ETG Capital Master Fund. The cross-commodity, relative-value energy hedge fund, with between $25 million to $50 million, has exposure to the U.S. power, natural gas, crude oil and refined products sectors.
The firm intially aimed to launch the fund in October, but was derailed by a committed investor who had too much exposure to the fast-sinking credit markets, according to co-founder Don Addison. The fund attracted commitments frm mainly large funds of funds looking for additional energy exposure.
“We’ve had 50 to 60 investor meetings over the last five or six months and there is tremendous appetite at the institutional level for the energy commodity sector,” said Addison.
No more than 50% of the fund’s capital can be allocated to any one particular commodity. The offering employs short-, intermediate- and long-term trading, and 85% percent of its trades are in some sort of spread, either in commodities, time or location within a commodity.
Addison said the firm is currently fairly bullish on the U.S. power sector and will be initiating several long positions across the curve in U.S. power. The fund will probably be a seller of natural gas on a “heat-rate basis,” but within that sector there are certain periods, particularly next winter when the firm will begin to initiate more long natural gas positions.
He also mentioned that the firm is contemplating launching an alternative energy offering in the carbon trading space but those plans are “still a bit further on the horizon at this point.”
The fund charges a 2% management fee and a 20% incentive fee with a $1 million minimum investment requirement.
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