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Run for the Hills, The Hedgies are coming!

| Tuesday December 26th, 2006 | 4 Comments

hedge.jpgAccording to the latest issue of ClearProfit, a clean energy Hedge fund has been launched: The ALMA Clean Energy Hedge Fund, managed by Bozkurt Aydinoglu.
If anyone doesn’t know what a hedge fund is, don’t worry, plenty of hedge fund managers probably don’t either these days. It’s sort of a generic and often inappropriate term for any semi-private investment vehicle. The
original hedge funds were called partnerships, and run by living legends like Warren Buffet and George Soros, who would often hedge different investments or futures market positions so that they would make money no
matter which way the overall market went, or sometimes they wouldn’t. Nowadays, Hedge funds might specialize in different sectors of the financial markets, like commodities, energy, currency exchange, bankruptcies,
spin-offs, and of course, Clean energy.


It’s hard for UPS workers to get 401-K money into a Hedge Fund (though I’m sure someone, somewhere on wall street is working on that.) Because the Hedgies often take what regulators see as excessive risk, theoretically, a
client should have several million dollars in liquid assets, or a couple of hundred thousand dollars per year in salary.
However, Hedge funds are the new black, even though some of their annual returns have been pretty deep in the RED lately. (NYtimes Here)
Why do they take all the risk? To make money of course! Hedgies typically take 2% of assets per year just to take care of your money, and then charge performance fees of 20%-50% of profits. This is a sweet deal for everyone
if Warren Buffett or Eddie Lampert are in control of your money, but less than sweet for the investor if the Hedge fund loses money or makes a mediocre return.
From the looks of it, ALMA is going to be a long/short fund, so they will buy what they see as good companies, profiting from an increase in price, and sell short ones that they think will lose market value, attempting to
make a profit when they buy the sold shares later at a lower price. Thus, this “hedge” fund is going to hedge against the total market direction on the assumption that if global stock markets tank tomorrow(always a
possibility) ALMA will make money on the downside with their short positions.
With 30 million Pounds to invest, is this a positive development for the clean energy sector?
Yes and no.
Is rich people making money off of clean energy companies that do well good? Probably so, someone has to foot the bill. Is rich people making money off of failing clean energy companies a good thing? My instinct says no, though individual circumstances could prove otherwise. The best hedge fund managers are known for making huge bets against the general market consensus. The stuff that Brass Christmas tree globes are made of.
Want to impress me Bozkurt? Buy Clean Energy and sell short Oil and Defense
Forget about the Brass, we’ll Make Alma the Angel on top of the tree.


▼▼▼      4 Comments     ▼▼▼

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  • Edward Romanoff

    Re: the green social entrepreneurship …
    Please acquaint yourself with the modern social entrepreneurship, http://www.motionmetrics.org

  • Edward Romanoff

    Re: the green social entrepreneurship …
    Please acquaint yourself with the modern social entrepreneurship, http://www.motionmetrics.org

  • http://www.greeninvestment.com Brad Pappas

    Oil prices and clean energy tend to have highly correlative prices. Theres very little point in shorting Oil and going long Clean Energy as you suggest, its a neutral position.

  • Sam

    Brad, the suggestion was not that it was a potentially lucrative position, or one with embedded alpha, but that such a position would be gutsy, but you miss the point of the piece.
    The question I tried to pose is whether rich people getting richer off of hedge fund managers getting rich off of clean energy stock quotation movements is inherently a good thing.
    If a short oil and defense, long clean energy trade did turn out to be ultimately profitable, the world would likely be a better place.