Sustainable investments run by Swiss fund managers rebounded after the financial crisis to reach a new high of CHF34.1bn (€23bn) during 2009 – with investment inflows outstripping the market average – according to a report from Zurich-based consulting firm onValues. The rise in sustainable assets managed by fund managers at the end of last year represented a 63% increase over the figure at the end of December 2008. The figures comprise assets in investment funds, segregated mandates and structured products.

In a 12-page report surveying 19 asset managers, onValues said the net asset flow into sustainable funds was approximately 22.9%, during 2009 compared to 4.5% seen by the average Swiss fund provider over the same period. The report said the sustainability asset inflows were “particularly marked” for thematic equity funds and new funds in the real estate and emerging market equities.

In a breakdown of Swiss sustainable assets, onValues said funds accounted for approximately 55% of the total, segregated mandates for 40% and structured products 5%. Institutions account for 45% of the sustainable assets market, with the balance invested by retail/private banking investors. However, the report said fund manager respondents believe institutional investors will drive the main growth in the sector in the next three years. OnValues said it set out to assess the market for specialist sustainable investment products and not the degree to which ESG factors are being used in mainstream investment portfolios. It said this means there are probably more total assets in Switzerland run via broader sustainability criteria.

The survey was backed by Bank Sarasin, Bank Vontobel, Ethos, Forum Nachhaltige Geldanlagen, INrate, Kaiser Ritter Partner, SAM, Swisscanto, UBS and Zürcher Kantonalbank.

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,

Part Three (Rampart bets on UK power) here, and

Part Four (FoHFs Culross looking for lower vol hedge funds) here.

Thank you for using Opalesque,
Matthias Knab
Founder and Executive Editor
Opalesque Ltd.
+49-89-2351-3055
www.opalesque.com

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“Energy and climate are extremely important to these people,” Gates told Friday a TED Conference audience packed with influential figures including the founders of Google and climate champion Al Gore.

Click here to view his speech

“The climate getting worse means many years that crops won’t grow from too much rain or not enough, leading to starvation and certainly unrest.”

Gates said he is backing development of “terrapower” reactors that could be fueled by nuclear waste from disposal facilities or generated by today’s power plants.

He broke down variables in a carbon-dioxide-culprit formula, homing in on a conclusion that the answer to the problem is a source of energy that produces no carbon.

“The formula is a very straight forward one,” Gates said. “More carbon dioxide equals temperature increase equals negative effects like collapsed ecosystems. We have to get to zero.”

To dramatize his point, Gates pulled out a large jar of fireflies in playful flashback to when he unleashed mosquitoes on a TED audience a year earlier while discussing battling malaria.

“They won’t bite,” Gates joked of the fireflies. “As a matter of fact, they might not even leave this jar.”

Gates touted terrapower as more reliable than wind or solar, cleaner than burning coal or natural gas, and safer than current nuclear plants.

“With the right materials approach it could work,” Gates said. “Because you burn 99 percent of the waste, it is kind of like a candle.”

Nuclear waste fed into a terrapower reactor would potentially burn for decades before being exhausted.

“Today we are always refueling the reactor so lot of controls and lots of things that can go wrong,” Gates said. “That is not good. With this, you have a piece of fuel, think of it like a log, that burns for 60 years and it is done.”

Researching and testing terrapower will cost hundreds of millions of dollars, with the building of a test reactor likely to cost in the billions.

Once the technology is proven, market forces will drive down costs, Gates predicted.

Work on terrapower hos been done in France and Japan, and there has been interest in India, Russia, China and the United States, according to the famed philanthropist.

Gates said that if he were allowed a single wish in the coming 50 years, it would be a global “zero carbon” culture.

“If I could pick a president or a vaccine, which I love, this is the wish I would pick,” he said.

“We need energy miracles. The microprocessor and Internet are miracles.

This is a case where we have to drive and get the miracle in a short time-line.”

Gates dismissed climate change skeptics, saying terrapower would render arguments moot because the energy produced would be cheaper than pollution-spewing methods used today.

“The skeptics will accept it because it is cheaper,” Gates said. “The might wish it did put out CO2, but they will take it.”

The world is at “an extraordinary moment” in the struggle to save the climate balance, according to former US vice president Gore.

A vital step will be to put a price on carbon dioxide emissions so the cost of polluting the air gets factored into the global economy.

Legislation to do that has cleared the US House of Representatives and must fight its way through the Senate, where it needs only a few more supporters to send the law on to the willing pen of President Barack Obama, Gore said.

“A price on carbon dioxide emissions can help us make the right decision, not only on nuclear, solar, and wind but on the gamut of energy alternatives available to us,” Gore said.

Gore’s Alliance for Climate Protection has organized groups in 22 US states with “swing senators” in the hope getting the legislation passed “before the political season gets completely wild.”

“These next few months represent the last feasible political window for quite some time to get this done,” Gore said. “So much is at stake we have to double down.”

This article is reproduced with kind permission of Agence France-Presse (AFP) For more news and articles visit the AFP website.

“This administration has made it clear that clean water is a top priority,” said an E.P.A. spokeswoman, Adora Andy, in response to questions regarding the agency’s drinking water enforcement. The E.P.A. administrator, Lisa P. Jackson, this year announced a wide-ranging overhaul of enforcement of the Clean Water Act, which regulates pollution into waterways.

“The previous eight years provide a perfect example of what happens when political leadership fails to act to protect our health and the environment,” Ms. Andy added.

Water pollution has become a growing concern for some lawmakers as government oversight of polluters has waned. Senator Barbara Boxer, Democrat of California, in 2007 asked the E.P.A. for data on Americans’ exposure to some contaminants in drinking water.

The New York Times has compiled and analyzed millions of records from water systems and regulators around the nation, as part of a series of articles about worsening pollution in American waters, and regulators’ response.

Read the full article…..

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.

Oil prices enjoyed a 9-day rise as the year began, and the International Monetary Fund’s prediction of a 3.1% global expansion in 2010 leads many to believe the price of food products will go up.

Analysts point out gold is not the only thing that has enjoyed performance; other precious metals, industrial metals and agriculture have also been part of a broader commodity recovery.

Read more here…

India will begin construction on the nation’s largest desalination plant in the city in Nemmili next month.  The project is slated for completion in two years, at which point it will be capable of producing 100 million liters per day (MLD) of fresh water from sea water via reverse osmosis.  The desalination plant will help meet municipal water needs, which have previously been met via monsoon rains.  Changing climate and weather patterns, however, are making India’s monsoon season more unpredictable.  Read more here…

In South Africa, upgrades are being made to an existing desalination plant on the Eastern Cape.  Upon completion, the new plant will have a ready to serve a municipal population of nearly 50,000 people in the Ndjambe Municipality.   Read more here…

Revenues from the global packaging industry totaled nearly $429 billion in 2009.  As demand for consumer goods increases in developing nations, that figure could rise to $530 billion by 2014.  It appears that “sustainable packaging” is growing even faster than the overall industry.  2009 revenues were $88 billion, but by 2014, that figure may nearly double to $170 billion.

Pike Research predicts plastic-based packaging, which represents over 1/3 of the global packaging industry, will be the fastest growing segment of the sustainable packaging sector by 2014 as it becomes more “eco-friendly.”  Read the full article…