Opalesque Exclusive: Highlight on energy (5) – Earth Wind and Fire Fund aims for uncorrelated portfolios in volatile sectors
From Kirsten Bischoff, Opalesque New York:
The philosophy behind investing in energy and resources is a simple one for Anric Blatt and Lauralouise Duffy, founders of Global Fund Exchange, the growing number of people around the globe is putting stress on the resources of our planet; smart investing in energy, clean energy and natural resources can drive positive environmental change and positive profits.
There are many factors placing stress on our resources, two of the biggest are population increases and development as the global economy reaches undeveloped nations.
- With the population growing by approximately 79 million every year, energy consumption in the developing world will overtake the amount consumed by the developed world in 2015. That’s a mere five years from now.
- As nations and economies develop over the next 25 years, global energy demand is estimated to increase by almost 60%.
Industry in transition
“We are in a bridge period,” Blatt says, regarding global efforts to change energy consumption habits. With traditional energy usage pegged at 96% and alternative energy hovering at only 4% (not to mention the slow pace of environmental regulation in many countries), change is going to be gradual.
“So we’ve come to this bridge period where traditional energy starts to become cleaner or more energy efficient, and where alternative energy becomes more cost efficient,” he says. “For those with a vision, these are really exciting times. This global energy transition offers the most significant investment opportunities my generation has ever seen. We’ve pioneered the concept of ‘Investing in the Bridge’ to take advantage of these profitable themes.”
Where is the money flow?
Deciding that the energy and natural resources space would provide opportunity to both invest in a positive future for the world and a profit, Blatt next determined on a strategy. Venture capitalism is high risk, and the firms with access to cash flows are not the small, emerging firms, but listed, public companies with access to stimulus money and targeted government-driven investments in the environment. Private equity difficulties include liquidity mismatches.
Tracking capital expenditures around the world is something the team does very carefully. Denmark, for example, has focused on wind technology, Germany and Spain on solar, Italy on solar and geo thermal, and South Korea has spent immense amounts of money on smart grid technology. China has recently surpassed the U.S. in allocations to smart grid technology.
“At the end of the day, all that funding goes into public markets,” he says. “So we made a conscious choice to find the best niche managers around the globe and run with them what is an energy hybrid portfolio.”
Targeting opportunity
New York-based Global Fund Exchange manages The Earth Wind & Fire Fund Ltd. with a mandate to utilize a diversified global macro, multi manager investment approach to investing in the world’s premiere specialists in all areas of the new energy revolution.
The fund focuses on clean energy, traditional energy, water, natural resources, carbon and agriculture, and then adds a hedging strategy to all of these to reduce both volatility and market-related risk. The focus of the fund crosses so many areas of energy because as Blatt points out, everything is interconnected.
“In order to produce energy you need water and in order to produce water you need energy. To convert commodities into a usable, commercial format you need energy. To convert energy into a usable format you need natural resources. Everything is interconnected and all of these things have climate implications.”
Building an uncorrelated portfolio in a volatile sector
Investing in any single area of the “Energy” space has two distinct risks: market exposures, especially during the financial crisis, have created additional volatility; and the risk of investing in a single sector where everything is correlated. To manage these risks one of the main focuses for the team is in calculating, tracking, and building a non-correlated portfolio.
Perhaps the best way to break down the portfolio is in terms of the three major working parts that it is comprised of. Investments have been identified as sensitive to equity markets (clean energy, water, and agriculture investments) and sensitive to commodity markets (energy, carbon, and natural resources). A third group of strategies, those that work to take the volatility out of the prior two groups are the trending and alpha strategies (systematic trading, a hedge portfolio, and a cash portfolio).
This focus on non-correlation within the sub-portfolio has seen the overall portfolio make solid gains during the three years since its January 2007 inception (annualized gains are +14.22%, with only three down months).
Private money is taking stakes in the future of the planet
While government spending in many countries has started to focus on alternative energy, there is additionally a shadow network of private money that has started to heavily invest in the space. Both environmental philanthropists and large businesses are positioning themselves with large stakes in this still-burgeoning industry.
“It has been a wonderful experience to focus not only on the profit aspect of business, but also on the impact of our actions on the planet and its people. Hence our philosophy – People, Planet, Profit.
Part Six: next Friday.
Part one (Tiburon: Wind and solar won’t save the world, hence the renaissance of nuclear) can be found here,
Part Two (ARP: Now we can all hedge power exposure intelligently) here,
On Saturday morning, Warren Buffett published his latest letter to Berkshire Hathaway shareholders.
Here are a few examples of how we apply Charlie’s thinking at Berkshire:
• Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be. In the past, it required no brilliance for people to foresee the fabulous growth that awaited such industries as autos (in 1910), aircraft (in 1930) and television sets (in 1950). But the future then also included competitive dynamics that would decimate almost all of the companies entering those industries. Even the survivors tended to come away bleeding.
Reuters, 10 February 2010 – Nasdaq and an arm of Deutsche Bank launched a global alternative energy and clean technology stock index on Wednesday that attempts to provide a pure signal of how the business is performing.
DB Climate Change Advisors, the climate change investment and research branch of Deutsche Bank’s asset management business, and Nasdaq OMX Group, Inc said the DB NASDAQ OMX Clean Tech Index is comprised of 119 companies.
Mark Fulton, Deutsche’s global head of climate change investment research, said companies in the index derive at least a third of their revenues from clean technology. And 106 of the companies have more than half their revenues in the space.
“These are companies that have very definitely declared a large stake in the clean tech sectors,” Fulton told Reuters. “We tried to produce an index that sends a purer, concentrated set of signals.”
The index, the first between a global bank and a global exchange company, lists 30 companies in solar energy and 13 in wind power. It also includes companies in energy efficiency, transport, waste management and water companies.
The index is equal-weighted to offer greater exposure to smaller-cap companies. In addition to a price return index, it also calculates a total return version.
Deutsche Bank Asset Management had about $6 billion under management as of September 2009 in climate related investments.
(Reporting by Timothy Gardner; Editing by David Gregorio)
ABOUT THE INDEX – A QUICK SUMMARY FROM ANRIC BLATT
The index is comprised of 119 companies identified by DBCCA from a global universe of 4,000. Each stock must have at least one third of revenues derived from clean technology within investable geographies and exchanges identified by NASDAQ OMX. Of these companies, 106 have over 50% in clean tech revenues, using only demonstrated revenue from filed financial statements. Constituent companies must have a market capitalization of $250 million and over $1 million average daily dollar trading volume. The index is equal-weighted to offer greater exposure to smaller-cap companies
NOTE: Two subsidiaries of Deutsche Bank act as the custodian and administrator of some of the funds managed by Global Fund Exchange.
New York – GFX Alternatives LLC, a member of the Global Fund Exchange Group, today (Jan 13th, 2009) announced the formation of a new multi-manager portfolio to invest in the dynamic alternative energy investment sector.
GFX Alternatives is dedicated to a diversified, global macro, multi-manager approach to allocating assets to premier investment managers who specialize in a broad spectrum of alternative energy opportunities. The firm is led by a management team of veteran hedge fund executives, Lauralouise Duffy and Anric Blatt, and will accept outside investors at the end of the first quarter 2009.
“Throughout the world there is an energy revolution occurring that is driving public and private investments into the alternative energy arena,” said Lauralouise Duffy, CEO, GFX Group LLC. “Investments in alternative energy solutions are aimed at achieving energy independence while reducing environmental damages. Governments, quasi-governmental organizations, states, countries, corporations and consumers around the world are implementing critical changes to transform their use and selection of energy resources.”
The world of energy and the investment world are on the brink of an evolutionary chapter in history. GFX Alternatives seeks to focus its private investment capabilities on the nascent and necessary development of energy alternatives and the evolutionary opportunities that accompany the changing face of global energy.
“Increased spending in alternative energies and renewable resources will cause significant economic growth and prosperity for the companies embracing this change, yet very few asset management companies exist to explore, develop and profit from this phenomenon,” said GFX Chairman Anric Blatt. “The GFX team has unique and extensive experience investing in and hedging allocations to the energy and resources sector. The firm is uniquely positioned to take advantage of extraordinary opportunities in this burgeoning corner of the investment world.”
GFX Alternatives aims to cap assets in this strategy at $1 Billion and will permit its clients to take direct investments into clean tech, carbon/emissions trading, water supply and treatment, as well as energy specific traders and Commodity Trading Advisers (CTAs).
GFX Alternatives LLC will present its investment strategies and business opportunities inside the USA Pavilion of the World Future Energy Summit in Abu Dhabi, United Arab Emirates, from January 19th- 21st, 2009. The summit will be the largest meeting of influential leaders within the renewable energy industry and is expected to draw over 15,000 attendees. More information on the summit can be found at http://www.worldfutureenergysummit.com.
About GFX Alternatives LLC
GFX Alternatives LLC, a member of the Global Fund Exchange Group, is an alternative investment management business that is focused on the alternative energy and renewable resources sectors. GFX Alternatives specializes in manager due diligence and selection, macro overlay of hedging, asset allocation, portfolio management and independent risk monitoring across all asset classes and managers in its portfolio. The founders have a combined 30 years of experience in starting, building and operating investment management businesses. The firm’s mission statement is “People, Planet, and Profit.”
About the Management Team
Lauralouise Duffy has worked as CEO of the GFX Group since 2006. As CEO, Ms. Duffy built an alternative investment platform service business, offering consulting, independent fund support, and structuring services to a wide range of hedge funds, fund of funds and institutional clients. In September 2007, she acquired the GFX Group. In 2008, the firm launched GFX Alternatives, a company dedicated to the alternative energy and renewable resources sector. Ms. Duffy spent 15 years on Wall Street working in the capacity of CEO, COO and managing director in the hedge fund community. Ms. Duffy was founder and president of Golden Retriever Capital, a global strategic development firm, consulting to major financial institutions in the alternative investment arena. Previously, Ms. Duffy spent her career running the operations, administration and distribution of eleven hedge funds, building and running investment fund businesses for Europe, Eastern Europe, Russia, Asia and South America, including equity, global macro, emerging markets, venture and private equity businesses. She was partner and COO of FNY Capital, LLC and Argonaut Capital Management and also worked for EGS Capital Management and Croesus Capital Management.
Anric Blatt, chairman, has been with the GFX Group since its founding in 2005. His principal areas of focus include strategy allocation, portfolio management, manager research and due diligence, as well as new product development and structuring. Mr. Blatt has performed extensive research and due diligence on hedge fund managers for over twelve years, and has been instrumental in the development and management of a number of successful investment vehicles both private and public. Prior to joining GFX, Mr. Blatt was the founder, CEO and chairman of the Infiniti Capital Group where he was involved in all aspects of building the business including product development, branding, portfolio management and research. During his tenure as CIO and CEO of the firm, he and his team successfully created and managed twelve public investment funds, a capital markets and securitization business and a hedge fund research organization. He was responsible for a portfolio of investments in excess of $2 billion AUM. Previously Mr. Blatt was the regional director in Asia for the qualitative fund of funds group Forsyth Partners and built the Asian business for managed futures specialist Kenmar.
Global Fund Exchanges is proud to be a signatory of the United Nations Principles for Responsible Investing (PRI), an investor initiative supported by more than 650 institutions representing in excess of $18 trillion in assets.
We believe that environmental, social and corporate governance (ESG) issues can affect the performance of our business and investment portfolios, and it is increasingly important for the investment community to align its goals with the broader aims of society.
Global Fund Exchange is committed to applying the Principles for Responsible Investment to all of our business and investment decisions in line with our fiduciary responsibility to our clients. We are proud to join with our fellow Signatories in this historic effort to promote responsible investment.
To learn more about the UN PRI Initiative and how you and your organization can join the effort, please visit the UNPRI Website
Global Fund Exchange is proud to be a signatory of the United Nations Principles for Responsible Investing (PRI), an investor initiative supported by more than 650 institutions representing in excess of $18 trillion in assets.
We believe that environmental, social and corporate governance (ESG) issues can affect the performance of our business and investment portfolios, and it is increasingly important for the investment community to align its goals with the broader aims of society.
Global Fund Exchange is committed to applying the Principles for Responsible Investment to all of our business and investment decisions in line with our fiduciary responsibility to our clients. We are proud to join with our fellow Signatories in this historic effort to promote responsible investment.
To learn more about the UN PRI Initiative and how you and your organization can join the effort, please visit the UN PRI Website.
To learn more about Global Fund Exchange and its investment philosophy, please visit our website – click here
Good morning. It is an honor for me to join this distinguished group of leaders from nations around the world. We come here in Copenhagen because climate change poses a grave and growing danger to our people. All of you would not be here unless you — like me — were convinced that this danger is real. This is not fiction, it is science. Unchecked, climate change will pose unacceptable risks to our security, our economies, and our planet. This much we know.
The question, then, before us is no longer the nature of the challenge — the question is our capacity to meet it. For while the reality of climate change is not in doubt, I have to be honest, as the world watches us today, I think our ability to take collective action is in doubt right now, and it hangs in the balance.
I believe we can act boldly, and decisively, in the face of a common threat. That’s why I come here today — not to talk, but to act. (Applause.)
Now, as the world’s largest economy and as the world’s……….read more
“Energy is the largest macro theme we have seen in our lifetime,” reasoned Lauralouise Duffy, cofounder with Anric Blatt of the Oyster Bay, N.Y.-based company.
With that, Duffy said Global Fund Exchange will invest in alternative energy and environmental technology, or greentech, as well as traditional energy like crude oil and natural gas.
“Ninety-five percent of the energy is traditional energy,” Duffy said. “You do not go from 95% to 45% overnight.”
Rather, the near-term “bridge period,” as Duffy called it, when so-called Green ideology is shaping the economy, is where the startup will look for opportunity.
New York-based asset management firm GFX Alternatives has created a multi-manager portfolio to invest in the alternative energy investment sector. The new platform will allocate assets to investment managers who specialize in a broad spectrum of alternative energy opportunities.
The firm is led by veteran hedge fund executives Lauralouise Duffy and Anric Blatt.
“Throughout the world there is an energy revolution occurring that is driving public and private investments into the alternative energy arena,” said Duffy, CEO of GFX Group. “Investments in alternative energy solutions are aimed at achieving energy independence while reducing environmental damages.”
“Increased spending in alternative energies and renewable resources will cause significant economic growth and prosperity for the companies embracing this change, yet very few asset management companies exist to explore, develop and profit from this phenomenon,” said Anric Blatt, chairman of GFX.
GFX Alternatives will being accepting outside investors at the end of the first quarter, and aims to cap assets in the new strategy at $1 billion.
The firm is led by a management team of veteran hedge fund executives, Lauralouise Duffy and Anric Blatt, and will accept outside investors at the end of the first quarter 2009.
“Throughout the world there is an energy revolution occurring that is driving public and private investments into the alternative energy arena,” said Lauralouise Duffy, CEO, GFX Group LLC. “Investments in alternative energy solutions are aimed at achieving energy independence while reducing environmental damages ……
Reuters, 10 February 2010 – Nasdaq and an arm of Deutsche Bank launched a global alternative energy and clean technology stock index on Wednesday that attempts to provide a pure signal of how the business is performing.
