EHFC Says Energy Funds Thrive In Amaranth’s Wake, Others Skeptical

Oct 26 2006 | 8:31am ET

Energy hedge funds have gotten a bad rap lately. But according to the Energy Hedge Fund Center, the highly-publicized failures of Motherock and Amaranth Advisors notwithstanding, interest and investment in such funds continue to grow.

The EHFC Directory of Energy Hedge Funds now boasts some 500 energy- and energy-related hedge funds, more than 175 of which invest in commodities.

“Interestingly, recent trends suggest more rapid growth of energy commodity funds in Europe, increasing numbers of funds focused on alternative energy and an increase in the number of funds with a high energy component,” Gary Vasey, co-principal of the center, said.

However, at the MARHedge World Wealth Summit held in Bermuda this week, the sentiment toward energy-focused funds was decidedly negative. On one panel of advisors representing large family offices, each member said that his or her exposure to energy and commodities was little to none. One panelist who runs a $1.4 billion family office and takes an investment philosophy “similar to that used by the Yale and Harvard endowments,” said that the portfolio has recently cut its energy and commodity exposure from 8% to 4%. Others on the panel said their exposure to these highly-volatile investments was in the 0-4% range. 

Meanwhile, the EHFC directory shows that hedge funds are increasingly investing in “exotic” instruments, including weather derivatives, catastrophe bonds, carbon emissions, uranium and other metals, as well as an increase in the number of green hedge funds.

"We are continuing to see more green hedge funds launch due to interest in alternative energy and global warming issues. We expect this trend to accelerate in 2007," said Peter Fusaro, co-principal of the center.


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