NatSource Founders Cough Up New Carbon Hedge Fund

Apr 11 2008 | 2:00am ET

Two founders of Natsource Asset Division Management have left the firm and formed their own hedge fund that focuses on trading carbon emissions. David Kandolha and Harvey Abrahams this month launched Akeida Capital Management, and are now fundraising for their maiden hedge fund, the Akeida Environmental Master Fund.

Akeida’s carbon hedge fund will employ a two-prong strategy. First, it will use an actively-managed trading account with exposure to a variety of different environmental commodities. In the carbon space, the fund will trade European Union allowances, Kyoto credits, emission reduction units and verified emission reductions, including those that are trading on U.S. exchanges such as Chicago Climate Exchange and the New York Mercantile Exchange’s Green Exchange, according to Kandolha.

“In addition, we’ll trade other environmental commodities, such as renewable energy certificates, ERCs and reactive organic gases,” he said.

According to Abrahams, there are only a handful of managers who have done these deals.

“I heard there were 39 hedge funds in the environmental space, but a lot of those guys are cleantech stock investors, and we really just buy the commodity,” he said.

The fund will also invest directly in projects that produce verifiable emission reductions and renewable energy certificates via payment-on-delivery contracts and prepayment contracts.
 
Kandolha said there was €40 billion (US$63 billion) worth of carbon trading last year and that from 2006 to 2007 it grew 50%. These figures do not include the U.S. markets, but only those markets covered by the Kyoto Protocol.

“So you could easily deploy several billions in capital without even getting into the U.S.,” he said.

On the fundraising front, Kandolha said the firm has encountered a mixed bag of investors who are chasing hot money and others who are genuinely interested in the fund because “they know there’s a lot of political support behind this area and so they’re trying to learn more and do something good.”

The fund sports an 18-month lockup period and charges a management fee of 2% and incentive fees of 20%. Its minimum investment requirement is $1 million.

The two previously founded, Natsource, which started in 1994 as an institutional energy broker and later expanded into the electricity and emissions sector. Kandolha and Abrahams say they left to focus on the investment management business.


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