Wed, 06/02/2008 - 06:00
The London-based investment management team at Cumulus has launched the Cumulus Climate Fund, a long/short equity fund that seeks to profit from the financial impact of climate change, on the PCE Investors platform.
The fund will be managed by the same team responsible for the Cumulus Weather Fund's equity portfolio, along with Ian Thomas, Cumulus's new head of equity research and a former colleague of fund manager James Hulse. The Cumulus team will be supported by an advisory panel comprising global and regional experts in the areas of politics, technology and science.
The fund has been run on a formal paper trading basis for 16 months, and delivering annualised returns of more than 15 per cent up to the end of December over some extremely volatile periods. The fund will target returns of 15 to 20 per cent on 10 per cent volatility, with an extremely low correlation to the S&P 500 (-0.10 for the paper trading period).
'Climate change is already affecting huge numbers of companies all around the world, from the effects of more extreme weather as well as from new legislation,' Hulse says. 'The fund's universe - environmental, energy, agricultural, consumer and industrial stocks - is also being impacted by natural resource constraints. As legislation and consumer behaviour changes, corporations need to adapt to survive, creating a great source of trading opportunities.
'Several fund management groups are seeking to take advantage of climate change investment opportunities, but none have our blend of investment track record, scientific credentials or practical experience advising more than 150 international companies on weather risk management.
'Shorting is an important element of the fund, as long-only funds will not be able to capture relative mispricing and will be hurt by a downturn in sentiment toward 'green' stocks.'
Peter Brewer, chief investment of the Cumulus Funds, says: 'Cumulus's assets under management now exceed USD250m and we've grown our investment team from three to 13 people in preparation for the next phase of our growth.
'The Cumulus team has great depth and breadth of experience in trading energy, carbon emissions, agricultural commodities and weather derivatives, and we are very excited about applying this expertise to the Cumulus Climate Fund.'
The multistrategy Cumulus Weather Fund, launched in October 2005, applies weather derivatives expertise to equity and commodity markets, opening positions only when weather and fundamental signals are aligned. The fund targets a 20 per cent return with 12 per cent annualised volatility and low correlation to equity markets.
The Cumulus Energy Fund launched in October 2006 replicates the energy trading strategy of the Weather Fund and focuses on European downstream commodities, such as electricity and carbon emissions. The fund, which is currently closed to new investors, trades commodity futures, swaps and options, targeting high returns with low correlation to commodity market indices and other energy funds.
PCE Investors is a hedge fund infrastructure platform that seeks to offer managers the freedom to implement their investment strategies efficiently by allowing them to focus on portfolio management rather than administration, reducing funds' costs and facilitating fundraising and investor relations.
At the beginning of this year, the platform's total assets under management exceeded USD1.4bn in strategies including weather-related event-driven (Cumulus Weather Fund I and Cumulus Energy); global utilities long/short (Utilities and Visibility Fund); European utilities long/short (Medea Pan-European Fund); European equity small and mid-cap long/short (Celeste European Small & Mid Cap Fund); European equity small cap long/short (Gugner Long/Short Fund); European financials long/short (Abaco Financials Fund); global macro (Cadwyn Global and Global Essential Fund) and Japanese equity long/short (Akamatsu Fund).
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