Opalesque Exclusive: London manager on low wheat inventories, mass urbanisation, OPEC - `commodities super cycle` is not a marketing gimmick
From Benedicte Gravrand, Geneva: Chris Brodie is the senior fund manager of the Krom River Commodity Fund and has 14 years of commodity trading experience. The fund itself is a discretionary pure multi-commodity fund, producing alpha in all market cycles, fundamentally and technically driven with transparent risk management. It was launched in June 2006, is domiciled in the Caymans and manages US$60 million. The June 07 NAV was at 119.43. The fund is soft-closed throughout August and September, during which time the managers are reassessing its positions as the AUM has grown significantly since inception, but it will re-open in October. Mr. Brodie gave his views on matters that bring home some real concerns.
Low inventories
“The grain inventories have just about halved since 2000 from 600 million mt to 300 million mt. In terms of days, inventories globally are at almost record low levels since 1960. This year for example, corn acreage increased by almost 12 million acres and yet next year, due to increased demand from the ethanol refiners, corn acreage will have to be increased again - this time by about 3 million acres. This will be difficult as there will also be a need to increase soybean and wheat acres. The central issue of the grains markets is not about supplying a certain crop; it is about not having enough acres to meet total demand.”
Indeed, Dow Jones reported on Wednesday that with wheat futures hovering within 75-85 cents of all-time record highs, some market analysts have recently been advising growers to actively sell their 2007 production and hedge future wheat crops, as well. "Wheat is currently trading at the highest price in history for this time of year," said analyst Bob Utterback. "We believe all wheat producers must be looking at multiple year sales now."
Exposed situation
“The theme to focus on is not the individual market but the individual conditions. The conditions in a boom market are low inventories where supply problems cause price explosions. Now in the grains, we have low inventories and high prices in grains like wheat and soy beans; high demand means we have reached low inventories and high price ranges despite the fact that we have not yet had a severe drought. If we now have even a mild drought we have a serious food problem on our hands.”
Ethanol: close to the price of unleaded
“Ethanol will be priced off petrol as essential substitute. Therefore give or take some problems in the wheat distribution, it should be very close to the price of unleaded petrol plus the actual benefit from any incentives.”
Mass urbanisation
According to the U.N., 2007 is the first year in human history in which more people live cities than in the countries. Mass urbanisation is a phenomenon that many decry as disastrous. Not Mr. Brodie. “It is an interesting concept that explains a lot. Mass urbanisation involves moving subsistence farmers who are not really economically interacting with the rest of the economic universe into cities. Urbanised, they become producers and consumers and develop an economic footprint. The more urbanisation you have, the greater the impact it has, not only in that specific country, but globally.”
It is a virtuous cycle
“The interesting thing for me is that mass urbanisation leads to stronger economic growth cycles requiring additional workers creating more economic growth; it is a virtuous cycle – it feeds on itself. The consequence of mass urbanisation is that the economies grow at a rate which is higher than demographics would normally suggest. That is why globally the world has been doing extremely well over the last 7 or 8 years. It is not just a question of China or of India, but it is about all the other developing countries as well. This year is the first year in human history when more people are living in towns and cities than to the countryside.”
Impact of growth on commodities
“These people are suddenly very big consumers of commodities. How long is this going to go on for? Probably to around 2020. Which means that the commodity demand growth is going to go on a lot longer and stronger than previously thought. One of the interesting facts that came out of a recent Bloomberg conference was that the average wage in India today is US$2 a day and in China US$5 a day. If you think that we potentially have a dozen years of growth ahead due to mass urbanisation, and if you consider that the commodity prices at the moment are extremely stressed even though the average wages are low it makes you understand exactly what sort of impact this growth is going to have on commodities.”
Super-cycles
“When I first heard of the world super-cycle, I thought it was a marketing gimmick. The more I look into it the more I buy into the concept. People who don’t believe it, I think, don’t understand the concept of mass urbanisation and its impact on the global economy.” A commodity super-cycle is a long period of higher prices.
In the same line, Francisco Blanch, Merrill Lynch’s head of global commodities research recently said to the Financial Times that “there are many differences between the commodity super-cycle of the 1970s and the current commodity super-cycle: monetary policy has been more accommodative despite the commodity price increases, we have not seen any major commodity supply shocks yet (such as the one created by the Iranian revolution 27 years ago), there is less scope for commodity demand substitution, and there is no massive investment program in the horizon that could create a significant productive capacity overhang over the next five years. Moreover, demand for commodities from emerging economies is incredibly strong and incredibly resilient, given the high prices… given the limited growth in supply across most markets I believe that oil, gold and grains prices will still have to increase substantially from the current levels in the next 10 years to slow down the healthy demand growth from emerging countries.” Full article.
`I am still friendly towards the price of oil`
“The demand for oil within OPEC is growing faster than the production of oil in OPEC. That explains why over the last few years, OPEC production has increased substantially but have not actually managed to increase exports substantially. Today, demand for oil is a million barrels a day higher than last year, but production is a million barrels a day less. What that is telling you is that you should expect oil prices to remain stressed while inventories remain low and vulnerable to supply disruptions. In other words, I am still, even at these prices, very friendly towards the price of oil. One of the interesting things about oil, is the way the way the market pricing has changed from a contango to a backwardation on WTI. That is telling you the market is a lot more prone to volatile prices.”
“Mass urbanisation leads to higher global demand for all commodities - including energy; as a result, if energy prices stay, high grain prices will remain high as well.” Corporate website: Source
Additional reporting from the FT today on oil, natural gas, wheat and metals: Oil resumes its climb amid volatile trading, Full article.
Additional reporting from Forbes: Commodities Rise Along With Crude Oil Source
Not a typo: $8,000 silver? (In 15 years), How Silver is different from Gold
From ResourceInvestor.com: Jason Hommel, publisher of the Silver Stock report, outlines several reasons why he thinks that, in 15 years, silver could push $8,000 an ounce.
Hommel says in this interview: “all of history nearly 5.0 bilion ozs. (155,000 tonnes) of gold have been mined with over 90% of that gold still existing. On the other hand, of the total 45 billion ounces of silver ever mined, about 9% remains, the rest has been consumed. Doing the math, the total value of existing gold equals about $3.3 trillion, yet for silver only $52 billion!”
So, Hommel says, "I think silver will head beyond $8000 an oz. in less than 15 years!" Full interview:
Article source: http://news.silverseek.com/GoldIsMoney/1186061730.php - Opalesque is not responsible for the content of external internet sites
NEWS - Commodites, Agriculture, Green Investment - NEWS
2/22/2008
BNP Paribas partners with Tiberius to develop actively managed commodity structured products
BNP Paribas yesterday announced its partnership with Tiberius Group to develop a range of actively managed commodity structured products. Investors will benefit from Tiberius’ experience and dedicated expertise in commodity management and BNP Paribas’ innovation and leadership in commodity investor derivatives. The products created by the partnership aim to generate alpha across all commodities by selecting those commodities or sub-sectors which are the most likely to outperform based on a rigorous model-based approach developed by Tiberius. Different from passive commodity investing, the objective of this approach is to improve investment performance in bullish, bearish and stable markets.
Lionel Semonin, Head of Commodity Investor Derivatives at BNP Paribas, commenting on the partnership said, “Over the last few years commodity markets have performed very well and given the current environment, we believe that certain sectors and certain commodities will perform much better than others. We aim to provide expert advice, from a leading player in the field, on choosing the winners for investors looking at liquid and transparent exposure.”
Nicolas Maduz, Managing Partner at Tiberius Group, added “We have invested our efforts on quantitative and qualitative commodity research in order to create significant alpha on the asset class. We chose BNP Paribas to leverage this work into the world of structured products for the benefit of investors believing in commodities for the long term.“
Lionel Semonin, Head of Commodity Investor Derivatives at BNP Paribas, commenting on the partnership said, “Over the last few years commodity markets have performed very well and given the current environment, we believe that certain sectors and certain commodities will perform much better than others. We aim to provide expert advice, from a leading player in the field, on choosing the winners for investors looking at liquid and transparent exposure.”
Nicolas Maduz, Managing Partner at Tiberius Group, added “We have invested our efforts on quantitative and qualitative commodity research in order to create significant alpha on the asset class. We chose BNP Paribas to leverage this work into the world of structured products for the benefit of investors believing in commodities for the long term.“
Ethanol Demand in U.S. Adds to Food, Fertilizer Costs
By Alan Bjerga
Feb. 21 (Bloomberg) -- U.S. plans to replace 15 percent of gasoline consumption with crop-based fuels including ethanol are already leading to some unintended consequences as food prices and fertilizer costs increase.
About 33 percent of U.S. corn will be used for fuel during the next decade, up from 11 percent in 2002, the Agriculture Department estimates. Corn rose 20 percent to a record on the Chicago Board of Trade since Dec. 19, the day President George W. Bush signed a law requiring a fivefold jump in renewable fuels by 2022.
Increased demand for the grain helped boost food prices by 4.9 percent last year, the most since 1990, and will reduce global inventories of corn to the lowest in 24 years, government data show. While advocates say ethanol is cleaner than gasoline, a Princeton University study this month said it causes more environmental harm than fossil fuels.
``We are mandating and subsidizing something that is distorting the marketplace,'' said Cal Dooley, a former U.S. congressman from California, who represents companies including Kraft Foods Inc. and General Mills Inc. as president of the Grocery Manufacturers Association in Washington. ``There are no excess commodities, and prices are rising.''
The energy bill requires the U.S. to use 36 billion gallons of renewable fuels by 2022, of which about 15 billion gallons may come from corn-based ethanol. The nation's current production capacity is about 8.06 billion gallons.
Alternative Energy
Oil prices tripled since the end of 2003, causing the government to consider alternative fuels. Now, the competition for corn is leading to higher costs for food companies, raising prices for everything from cattle to dairy products.
Corn doubled in the past two years, touching a record $5.29 a bushel today in Chicago. The price of young cattle sold to feedlots gained 8.7 percent in the past year, reaching a record $1.1965 a pound on Sept. 6 on the Chicago Mercantile Exchange. Average whole milk rose 26 percent to $3.871 a gallon in January from a year earlier, the Department of Labor said yesterday.
``For thousands of years, humans grew food and ate it,'' said Andrew Redleaf, 50, chief executive officer of Whitebox Advisors LLC, a Minneapolis hedge fund that manages $3 billion. ``Now we are burning crops to make fuel.''
Whitebox bought three U.S. grain depots in the past year to profit from the growth in demand.
Updated Forecast
Farmers will have to increase planting of corn for ethanol by 43 percent to 30 million acres by 2015 to meet the government's requirements, said Bill Nelson, a vice president at A.G. Edwards Inc. in St. Louis. This year, growers outside the Midwest are focused on more profitable crops such as soybeans and wheat, the USDA said today in a crop forecast.
Corn planting will fall 3.8 percent this year to 90 million acres as farmers sow 12 percent more land with soybeans and 6 percent more with wheat, Joe Glauber, USDA acting chief economist, said today at the department's annual conference in Arlington, Virginia. The USDA said Feb. 8 that world corn reserves would drop for the seventh year in the past eight.
Increased planting has caused some fertilizer costs to double. Diammonium phosphate, a nutrient used on corn fields, reached $792.50 a ton on Feb. 15 from $297 a year earlier, USDA data show.
Greenhouse Gases
Researchers led by Timothy Searchinger at Princeton University said their study showed greenhouse-gas emissions will rise with ethanol demand. U.S. farmers will use more land for fuel, forcing poorer countries to cut down rainforests and use other undeveloped land for farms, the study said.
Searchinger's team determined that corn-based ethanol almost doubles greenhouse-gas output over 30 years when considering land-use changes. Bob Dinneen, president of the Renewable Fuels Association in Washington, said the study used a flawed model and overestimated how much land will be needed.
Ethanol is important in reducing emissions, ending energy dependence on the Middle East and creating jobs in rural areas, Dinneen said today at the USDA conference.
``There are still some who want us to choose between food and fuel,'' said Dinneen, whose organization represents ethanol producers including Archer Daniels Midland Co. ``I don't think we have to choose.'' Research shows cellulosic ethanol made from grasses and crop waste may contribute 21 billion gallons by 2022, and farmers will be able to boost yields, he said.
Food Costs Rise
U.S. food costs, which account for about a fifth of the consumer-price index, rose 0.7 percent in January, the Labor Department said Feb. 20. They will increase as much as 4 percent this year, Glauber said in remarks at the forum.
``Food prices through 2010 will rise greater than the overall inflation rate,'' because of rising energy and commodity costs, he said.
Ethanol's contribution to inflation is limited, USDA economist Ephraim Leibtag said in an interview. A 50 percent jump in corn prices in 2007 from the 20-year average only added 1.6 cents to the cost of an 18-ounce box of Kellogg Co. Corn Flakes cereal, Leibtag said. The cost is less than 2 percent per box, JPMorgan Chase & Co. estimates.
Ethanol's boom helps restrain government spending on farm subsidies, said House Agriculture Committee Chairman Collin Peterson, a Minnesota Democrat. The USDA expects taxpayers to spend $941 million on the two main subsidy programs tied to price this year, down from $9.1 billion in 2006.
Smithfield, Tyson
For food companies, demand for ethanol translates into lower profits and job cuts.
Smithfield Foods Inc., the largest U.S. hog producer, said Feb. 19 it will cut output by as much as 1 million animals a year, or 5 percent, because feed costs are too high. The company is based in Smithfield, Virginia.
Tyson Foods Inc., the largest U.S. meat company, forecast an increase in grain costs this year of more than $500 million. Springdale, Arkansas-based Tyson also reported a 40 percent drop in first-quarter profit and said it will close a beef plant in Kansas, firing 1,800 workers.
Ethanol ``has caused a domino effect,'' CEO Richard L. Bond said in a statement Jan. 28. ``For the foreseeable future, consumers will pay more and more for food.''
To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net.
Last Updated: February 21, 2008 19:32 EST
Nestlé chief warns of land resources clash
By Jenny Wiggins
Published: February 22 2008 02:00 | Last updated: February 22 2008 02:00
Peter Brabeck, Nestlé's chairman and chief executive, yesterday warned the food industry would need to fight the biofuel industry for access to arable land as the world runs short of water.
"We will not find sufficient water to produce all the crops . . . there will be a fierce fight for arable land," he told the Financial Times after Nestlé reported strong organic sales growth of 7.4 per cent for 2007.
Nestlé shares closed up 3.5 per cent at SFr482.5, the biggest rise since August, after the Swiss company said it had withstood record-high commodity costs by lifting its prices about 3 per cent last year - double the annual rate at which it typically raises prices. The group's net profit rose 15 per cent to SFr10.6bn ($9.8bn).
Nestlé investors were also reassured to hear James Singh, Nestlé's chief financial officer, confirm that the company had no exposure to "the current credit crisis" or subprime mortgages.
Mr Brabeck said the food industry would remain in competition with the biofuels industry for land as rapid global economic development increased demand for food. "The consumption habit changes in emerging markets will not revert," he said, adding that while he expected global food prices to "level" this year, they were likely to continue rising over the long term. "I think we will have to live with more food [price] inflation."
But Nestlé's raw material costs are expected to moderate this year as commodity markets become less speculative.
"Our basket line is flattening out and there is the possibility it might even come down a bit," Mr Brabeck said, adding that he did not expect milk prices - Nestlé`s biggest commodity cost - to return to last year's record highs of about $5,400 per tonne.
"That was the most difficult [commodity price rise] for us to adjust to," he said, adding that as hedge fund speculators have moved out of the global milk market, prices have fallen to about $3,000.
Mr Brabeck said Nestlé would continue to keep raising prices by about 3 per cent at the start of 2008 but that it expected to raise them at a slower rate by the end of the year.
Mr Brabeck claimed Nestlé's transformation into a "research and development and health and wellness company" from a "mere food company" enabled it to add value to its products, and charge more for them.
"We are much less dependent on commodity costs than we were before," he said.
Nestlé has disposed of what it calls "commodity" food businesses such as UHT milk, frozen vegetables and dried pasta in recent years and concentrated on developing brands such as Nespresso.
"There is a huge difference if you are selling coffee beans or if you are selling Nespresso," Mr Brabeck said.
Nespresso, a coffee club that chose American actor George Clooney to be its spokesman, sells little "pods" of coffee in brightly coloured packets online to members who use them to make espressos at home.
Nespresso has been an enormous success for Nestlé. Sales rose 40 per cent last year and are expected to hit SFr2bn this year, and the group now has some 120 specialist Nespresso stores globally.
Mr Brabeck will hand over his job as chief executive to Paul Bulcke, who has been running Nestlé's Americas business, in April, but will retain his chairmanship of the company.
As chairman, he will consider whether Nestlé should sell its stakes in Alcon and L'Oréal. Yesterday, he said Nestlé no longer needed its stake in Alcon as a financial asset, but that deciding what to do with L'Oréal was more complicated because the French group had the potential to remain a good business partner in the future if Nestlé expands into the "personal care" business.
Published: February 22 2008 02:00 | Last updated: February 22 2008 02:00
Peter Brabeck, Nestlé's chairman and chief executive, yesterday warned the food industry would need to fight the biofuel industry for access to arable land as the world runs short of water.
"We will not find sufficient water to produce all the crops . . . there will be a fierce fight for arable land," he told the Financial Times after Nestlé reported strong organic sales growth of 7.4 per cent for 2007.
Nestlé shares closed up 3.5 per cent at SFr482.5, the biggest rise since August, after the Swiss company said it had withstood record-high commodity costs by lifting its prices about 3 per cent last year - double the annual rate at which it typically raises prices. The group's net profit rose 15 per cent to SFr10.6bn ($9.8bn).
Nestlé investors were also reassured to hear James Singh, Nestlé's chief financial officer, confirm that the company had no exposure to "the current credit crisis" or subprime mortgages.
Mr Brabeck said the food industry would remain in competition with the biofuels industry for land as rapid global economic development increased demand for food. "The consumption habit changes in emerging markets will not revert," he said, adding that while he expected global food prices to "level" this year, they were likely to continue rising over the long term. "I think we will have to live with more food [price] inflation."
But Nestlé's raw material costs are expected to moderate this year as commodity markets become less speculative.
"Our basket line is flattening out and there is the possibility it might even come down a bit," Mr Brabeck said, adding that he did not expect milk prices - Nestlé`s biggest commodity cost - to return to last year's record highs of about $5,400 per tonne.
"That was the most difficult [commodity price rise] for us to adjust to," he said, adding that as hedge fund speculators have moved out of the global milk market, prices have fallen to about $3,000.
Mr Brabeck said Nestlé would continue to keep raising prices by about 3 per cent at the start of 2008 but that it expected to raise them at a slower rate by the end of the year.
Mr Brabeck claimed Nestlé's transformation into a "research and development and health and wellness company" from a "mere food company" enabled it to add value to its products, and charge more for them.
"We are much less dependent on commodity costs than we were before," he said.
Nestlé has disposed of what it calls "commodity" food businesses such as UHT milk, frozen vegetables and dried pasta in recent years and concentrated on developing brands such as Nespresso.
"There is a huge difference if you are selling coffee beans or if you are selling Nespresso," Mr Brabeck said.
Nespresso, a coffee club that chose American actor George Clooney to be its spokesman, sells little "pods" of coffee in brightly coloured packets online to members who use them to make espressos at home.
Nespresso has been an enormous success for Nestlé. Sales rose 40 per cent last year and are expected to hit SFr2bn this year, and the group now has some 120 specialist Nespresso stores globally.
Mr Brabeck will hand over his job as chief executive to Paul Bulcke, who has been running Nestlé's Americas business, in April, but will retain his chairmanship of the company.
As chairman, he will consider whether Nestlé should sell its stakes in Alcon and L'Oréal. Yesterday, he said Nestlé no longer needed its stake in Alcon as a financial asset, but that deciding what to do with L'Oréal was more complicated because the French group had the potential to remain a good business partner in the future if Nestlé expands into the "personal care" business.
Gold nears $1,000 as stagflation fears grow
By Chris Flood
Published: February 21 2008 17:17 | Last updated: February 21 2008 17:17
Gold hit a record $953.60 a troy ounce on Thursday as oil’s move above $100 and inflation fears provided fresh upward momentum.
Fuelling the rally were fears the US economy could be heading for stagflation after the Federal Reserve published forecasts for lower growth and higher inflation.
EDITOR’S CHOICE
Editorial Comment: Gold is the new global currency - Jan-07
Analysis: Investors push gold ever higher - Jan-03
In Depth: The gold rally - Feb-21
Investors expect further US rate cuts to stimulate growth, but worry that easing monetary policy will undermine the battle to control inflation.
Daniel Hynes, metals strategist at Merrill Lynch, pointed to “a multitude” of drivers pushing gold higher.
“But the latest is inflation concerns. We’ve seen money continue to flow into the sector. Every time there is a dip in gold prices, buyers come in aggressively.”
Strong inflows into gold exchange-traded funds have helped gold prices rise 14.4 per cent this year.
“The fight against inflation is being sacrificed in G7 countries to avert the risk of recession and investors are likely to seek gold as an inflation hedge,” said Mandy La Grange of Nomura, who forecasts gold to average $1,000 this year.
Copyright The Financial Times Limited 2008
Published: February 21 2008 17:17 | Last updated: February 21 2008 17:17
Gold hit a record $953.60 a troy ounce on Thursday as oil’s move above $100 and inflation fears provided fresh upward momentum.
Fuelling the rally were fears the US economy could be heading for stagflation after the Federal Reserve published forecasts for lower growth and higher inflation.
EDITOR’S CHOICE
Editorial Comment: Gold is the new global currency - Jan-07
Analysis: Investors push gold ever higher - Jan-03
In Depth: The gold rally - Feb-21
Investors expect further US rate cuts to stimulate growth, but worry that easing monetary policy will undermine the battle to control inflation.
Daniel Hynes, metals strategist at Merrill Lynch, pointed to “a multitude” of drivers pushing gold higher.
“But the latest is inflation concerns. We’ve seen money continue to flow into the sector. Every time there is a dip in gold prices, buyers come in aggressively.”
Strong inflows into gold exchange-traded funds have helped gold prices rise 14.4 per cent this year.
“The fight against inflation is being sacrificed in G7 countries to avert the risk of recession and investors are likely to seek gold as an inflation hedge,” said Mandy La Grange of Nomura, who forecasts gold to average $1,000 this year.
Copyright The Financial Times Limited 2008
Covering Carbon Credit Projects Via Political Risk Insurance
February 21:Market Risk -
Author: Steve McKay
Date: 2008-02-21
Zurich yesterday announced it is providing political risk insurance (PRI) for carbon credit projects. This is the first time Zurich has offered coverage for these types of “green” projects in emerging markets, reflecting the Group’s recently launched global climate initiative focusing on the myriad of risks associated with climate change.
Zurich yesterday announced it is providing political risk insurance (PRI) for carbon credit projects. This is the first time Zurich has offered coverage for these types of “green” projects in emerging markets, reflecting the Group’s recently launched global climate initiative focusing on the myriad of risks associated with climate change.
Under the Kyoto protocol – an international treaty created to reduce greenhouse gas (GHG) emissions linked to global warming – certain types of projects are eligible for carbon credits based on the level of greenhouse gases reduced.
The carbon credit market – currently estimated to be USD 60 billion – has doubled during the last two years. The protocol provides the means to monetize the environmental benefits of reducing GHGs and sell the emissions credits. Zurich’s policy helps to protect against risk of host government actions that might prevent an investor from receiving benefits associated with emission credits generated.
“Our involvement with carbon credit projects highlights the role of political risk coverage in helping make these projects more attractive to investors who are concerned about political risk and market volatility,” said Daniel Riordan, executive vice president and managing director for Zurich’s emerging markets unit. “As financial incentives for carbon projects become more common in the advent of emissions trading, we anticipate seeing more investments in emerging markets.”
Zurich is a market leader providing political risk and trade credit insurance on a global basis. More than 300 of the world’s leading companies – including financial institutions, multinational corporations, investors, exporters and infrastructure developers – are supported from Zurich offices in Washington D.C., Barcelona, Frankfurt, Hong Kong, London, Paris, Sydney and Tokyo. All policies are backed by the financial strength of Zurich Financial Services Group with ratings of AA- from Standard & Poor’s.
Zurich is a member of the Berne Union (BU) – an international union of credit and investment insurers – and often coinsures and reinsures with fellow BU members that are export credit agencies and multilateral institutions.
Zurich’s recently launched climate initiative has a three-pillar approach. First, Zurich has established an internal Climate Office that is charged with driving an understanding of climate-related risks across its businesses and is fully embedded in Zurich’s underwriting infrastructure. Second, Zurich has established a Climate Change Advisory Council that will directly report to Zurich’s Group Management on strategic and operational issues associated with climate change. Third, as part of the climate initiative Zurich launched an applied research program with organizations and institutions to examine the critical economic, finance and policy issues associated with climate change.
The main objective of Zurich’s market-focused global climate change initiative is to understand the emerging weather, financial and regulatory risks associated with climate change and to develop products and services that allow customers to cope with these risks.
Source: RiskCenter.com
Author: Steve McKay
Date: 2008-02-21
Zurich yesterday announced it is providing political risk insurance (PRI) for carbon credit projects. This is the first time Zurich has offered coverage for these types of “green” projects in emerging markets, reflecting the Group’s recently launched global climate initiative focusing on the myriad of risks associated with climate change.
Zurich yesterday announced it is providing political risk insurance (PRI) for carbon credit projects. This is the first time Zurich has offered coverage for these types of “green” projects in emerging markets, reflecting the Group’s recently launched global climate initiative focusing on the myriad of risks associated with climate change.
Under the Kyoto protocol – an international treaty created to reduce greenhouse gas (GHG) emissions linked to global warming – certain types of projects are eligible for carbon credits based on the level of greenhouse gases reduced.
The carbon credit market – currently estimated to be USD 60 billion – has doubled during the last two years. The protocol provides the means to monetize the environmental benefits of reducing GHGs and sell the emissions credits. Zurich’s policy helps to protect against risk of host government actions that might prevent an investor from receiving benefits associated with emission credits generated.
“Our involvement with carbon credit projects highlights the role of political risk coverage in helping make these projects more attractive to investors who are concerned about political risk and market volatility,” said Daniel Riordan, executive vice president and managing director for Zurich’s emerging markets unit. “As financial incentives for carbon projects become more common in the advent of emissions trading, we anticipate seeing more investments in emerging markets.”
Zurich is a market leader providing political risk and trade credit insurance on a global basis. More than 300 of the world’s leading companies – including financial institutions, multinational corporations, investors, exporters and infrastructure developers – are supported from Zurich offices in Washington D.C., Barcelona, Frankfurt, Hong Kong, London, Paris, Sydney and Tokyo. All policies are backed by the financial strength of Zurich Financial Services Group with ratings of AA- from Standard & Poor’s.
Zurich is a member of the Berne Union (BU) – an international union of credit and investment insurers – and often coinsures and reinsures with fellow BU members that are export credit agencies and multilateral institutions.
Zurich’s recently launched climate initiative has a three-pillar approach. First, Zurich has established an internal Climate Office that is charged with driving an understanding of climate-related risks across its businesses and is fully embedded in Zurich’s underwriting infrastructure. Second, Zurich has established a Climate Change Advisory Council that will directly report to Zurich’s Group Management on strategic and operational issues associated with climate change. Third, as part of the climate initiative Zurich launched an applied research program with organizations and institutions to examine the critical economic, finance and policy issues associated with climate change.
The main objective of Zurich’s market-focused global climate change initiative is to understand the emerging weather, financial and regulatory risks associated with climate change and to develop products and services that allow customers to cope with these risks.
Source: RiskCenter.com
Tuono Launches Alpha Energy Fund
February 21, 2008
Tuono Corp., a Naples, Fla.-based commodity trading advisor, is adding a pair of futures funds. The firm this month launched the Alpha Energy Fund, and is prepping an equities and commodities fund for launch later this year.
The Alpha Energy Fund is a multi-strategy offering that trades in the energy complex employing discretionary strategies and multiple time frames, according to Tyler Wood, CEO.
“The fund has seven traders and we’re scaling it up to 10 traders,” he said.
Alpha Energy currently has $3 million in commitments and has an initial target of $10 million. It charges a 1% management fee and a 10% incentive fee, with a $100,000 minimum investment requirement.
Tuono has also begun trading an Absolute Return Series that it may offer to outside investor by year-end. The strategy is trading several different components of the Dviersified Trend Indicator of the Standard & Poor’s 500 Index, according to Wood.
“You’ve got equities and commodities futures mixed in this indicator and several of those components are being traded,” he said.
Tuono Corp., a Naples, Fla.-based commodity trading advisor, is adding a pair of futures funds. The firm this month launched the Alpha Energy Fund, and is prepping an equities and commodities fund for launch later this year.
The Alpha Energy Fund is a multi-strategy offering that trades in the energy complex employing discretionary strategies and multiple time frames, according to Tyler Wood, CEO.
“The fund has seven traders and we’re scaling it up to 10 traders,” he said.
Alpha Energy currently has $3 million in commitments and has an initial target of $10 million. It charges a 1% management fee and a 10% incentive fee, with a $100,000 minimum investment requirement.
Tuono has also begun trading an Absolute Return Series that it may offer to outside investor by year-end. The strategy is trading several different components of the Dviersified Trend Indicator of the Standard & Poor’s 500 Index, according to Wood.
“You’ve got equities and commodities futures mixed in this indicator and several of those components are being traded,” he said.
Pa. Firm Launches Water-Focused Hedge Fund
February 22, 2008
West Conshohocken, Pa.-based Aqua Terra Asset Management is banking on the world’s increasing demand for water. Aqua Terra Water Partners is slated to launch on March 1 with between $5 million and $10 million.
The long/short hedge fund, investing in global water and water infrastructure assets, aims to be highly selective and opportunistic on the short side, because “this is really a story of water companies that have good long-term growth prospects and you can really get hammered on the shorts so you have to be selective and careful,” said a source with knowledge of the fund.
All told, the portfolio will hold some five short positions and another 25 to 30 long names.
The source said the lack of water in the emerging markets of India and China coupled with “huge water issues” here in the U.S. makes it an opportune time for fund launch.
The fund is targeting 12% to 15% annual returns with a volatility target that’s slightly less than the Standard & Poor’s 500 Index. It charges a 1.5% management fee and a 20% performance fee, subject to a high water mark, and its minimum investment requirement is $250,000.
West Conshohocken, Pa.-based Aqua Terra Asset Management is banking on the world’s increasing demand for water. Aqua Terra Water Partners is slated to launch on March 1 with between $5 million and $10 million.
The long/short hedge fund, investing in global water and water infrastructure assets, aims to be highly selective and opportunistic on the short side, because “this is really a story of water companies that have good long-term growth prospects and you can really get hammered on the shorts so you have to be selective and careful,” said a source with knowledge of the fund.
All told, the portfolio will hold some five short positions and another 25 to 30 long names.
The source said the lack of water in the emerging markets of India and China coupled with “huge water issues” here in the U.S. makes it an opportune time for fund launch.
The fund is targeting 12% to 15% annual returns with a volatility target that’s slightly less than the Standard & Poor’s 500 Index. It charges a 1.5% management fee and a 20% performance fee, subject to a high water mark, and its minimum investment requirement is $250,000.
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