Mon, 16/06/2008 - 00:55
Alternative multi-manager Ermitage Group, which runs USD2.8bn in assets, has launched a niche fund of hedge funds to capitalise on the growing interest and public awareness surrounding environmental issues and climate change. The firm has also established a presence in New York alongside its existing offices in Jersey and London.
A sister fund to Ermitage's established Resources Fund, the Clean Resources Fund has been launched with an initial USD20m investment. It aims to provide investors with access to a concentrated portfolio of managers exploiting opportunities within the alternative energy sector, including resource and energy efficiency, energy technology, clean power generation, greenhouse gas management, and water and waste management.
'Ermitage's Clean Resources Fund is the latest in a series of high performance targeting fund of funds, specifically created to capitalise on strong and long term market opportunities,' says chief investment officer Jonathan Wauton. 'This fund has the additional benefit of investing within a market sector with a strong ethical appeal.'
An equity-centric product, the fund will target returns of between 16 and 20 per cent during bull market conditions and aims to protect assets during bear markets, and its risk budget will be similar to traditional equity markets. The fund's equity exposure allows investors to access clean resource investment opportunities that are not typically accessible to conventional commodity indices, for example in the renewable energy sector.
It has been built using Ermitage's portfolio construction system, known as Optics, which is designed to maximise the value of the firm's hedge fund research, macroeconomic and risk analysis in order to deliver consistent risk-adjusted performance.
Awareness and media coverage of potential opportunities in the clean resources field has grown steadily over recent months, Ermitage says, fuelled by record commodity and energy prices. Against a backdrop of increased government interest and legislation worldwide, clean resources sub-sectors such as renewable energy, water and environmental resource management have become firmly established investment themes.
The Clean Resources Fund aims to generate attractive risk-adjusted returns from leading managers while delivering diversification of risk across global markets, sectors, styles and themes.
The fund is available in US dollar, sterling and euro currency classes, with a minimum initial investment of EUR125,000 or the dollar or sterling equivalent. The annual management fee is 1.5 per cent and there is a 10 per cent performance fee with high watermark. Subscription is monthly with 90 calendar days' notice required for redemptions.
'The clean resources theme has been a sub-strategy within our Resources Fund for almost two years and our decision to create a pure play clean resources product reflects our view of the opportunities that exist in this emerging space,' Wauton says. 'The fund will offer investors the potential for highly attractive risk-adjusted returns with the multi-manager approach aiming to mitigate adverse sector, technology and manager risk.
'This is a rapidly evolving sector, and by focusing on best of breed asset managers, the fund will seek to be aligned with the latest developments, including global climate change policies and technologies. With the number of new strategies and fund launches in this sector, we expect the overall outlook for the fund to be extremely positive.'
Ermitage's New York office will perform hedge fund manager research and service the firm's North American clients. The firm says its opening is a cornerstone of its strategic development plans, which focuses strongly on servicing the needs of North American pension funds and endowments, and builds on Ermitage's appointment in 2006 to run a European fund of hedge funds mandate by one of the largest US pension funds.
The new operation, Ermitage Americas, will be staffed by strategy specialists and client service professionals relocating from the UK and recruited in the North American marketplace.
'Ermitage's ability to provide institutions with sophisticated solutions has naturally led us to open a North American office, enabling us to provide an innovative service for pension plan sponsors, endowments and foundations,' says the group's chief executive Ian Cadby. 'Our knowledge and track record within the European hedge fund space remains one of the main attractions to American institutions.
'However, this has been complemented in the last year by Ermitage's Optics customised portfolio system, which has been built to deliver institutional portfolios capable of consistent risk-adjusted performance, maximising the value of the firm's hedge fund research, macroeconomic and risk analysis. We believe our ability to build individual portfolios via a robust 'glass box' process will be the foundation of our client service in North America.'
Ermitage Group was acquired by its management and investment trust Caledonia Investments from South Africa's Liberty Group in March 2006. A provider of alternative investment services to institutions, pension funds and private clients, the group made its first hedge fund investment in 1984. In addition to funds of hedge funds, managed accounts and customised solutions for individualised mandates, it also provides a private client services through its global wealth management services division.
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