Former Energy Traders Preps Energy L/S Fund

Jul 23 2007 | 12:10pm ET

A pair of former energy traders is looking to cash in on volatility in that market with a new hedge fund offering. Jeffrey Dutile and Christian Hnat of Boston-based Cabeus Capital are set to launch the Cabeus Fund in October with between $25 million and $30 million in assets.

Dutile, who has been trading in the electricity market since 1996 for Edison Mission Marketing and Trading, said the predominantly long/short fund utilizes both fundamental and technical factors in its trading. “We’re focused on electricity and will trade some products like natural gas and crude, but 80% of the portfolio will be in the electricity space,” said Dutile.

“We look at probability rather than inefficiency because a lot of times you have the weather changing or outages so we look at all of the factors like load and fuel cost, temperature, congestion. On the technical side we look at good entry and exit points for the longer term trades.”

Dutile is bullish on the energy sector and thinks volatility within the sector will continue to increase. “There’s always the growing demand for electricity and the need for more green power. With carbon and emissions, companies have to be smart about running their coal plants so that could add to volatility as well. Once companies hit their emissions limit, they have to shut that unit down even though it might be cheaper to run than a more expensive unit, and that’s the kind of thing that’s going to come into play more and more,” he said.

Dutile said the fund, which currently is being looked at by two investors in the late stages of their due diligence, will initially close at $50 million “so we can hire more staff and ramp up.”

The Cabeus Fund will charge a 2% management fee and 20% performance fee, and features a negotiable minimum investment requirement.


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