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First List of \'Green\' Hedge Funds?

Date: Friday, February 6, 2009
Author: James Armstrong, Hedge Fund Correspondent, Markets Media Online

The Energy Hedge Fund Center (EHFC) has come up with what might be the world's first directory of "green" hedge funds.

Funds trading in carbon, renewable energy, cleantech, water, weather derivatives and forestry are all included in the directory. Such markets are maturing, and hedge funds have been increasingly interested in profiting from them.

Peter Fusaro, chairman of Global Change Associates and co-principal of the EHFC, says when he started tracking the industry in 2004, there was only one green hedge fund. The new directory contains 98 funds, and EHFC has been contacted about other funds that are launching soon.

The directory became available on Wednesday, but EHFC had already begun selling copies prior to publication. The directory is aimed at investors, funds-of-funds and banks, Fusaro said.

There is currently about $15 billion in green hedge funds. Many of the equity funds took big hits last year, but Fusaro said the carbon funds continue to grow.

"Most funds were down last year, but they still survived," said Fusaro.

"Green" hedge funds seek to profit from the global economy's increasing environmental consciousness, not necessarily to make the world a greener place. Hedge funds that trade in carbon, for instance, can make money off of cap and trade schemes for reducing carbon emissions, though the funds themselves do not necessarily help to reduce those emissions.

Fusaro said some of the funds do help to develop cleaner technologies, though, by deploying more capital into the equities of green companies. Some of the larger funds are also investing in project finance, which is even more helpful, he said.

EHFC expects to see more fund launches this year as the sector continues to grow as an asset class.