Energy transition opportunities as hedge fund demand rises

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Jos Shaver, Electron Capital Partners


Investor appetite for hedge funds has gained momentum as the need for absolute and relative returns continues to grow in the wake of a challenging and volatile macro-economic environment. Strong performance in this environment will be driven by active investment and risk management, diversification, and stock selection, both long and short.

Long/short equity hedge fund, Electron Capital Partners, LLC, has a 17-year track record investing in the Energy Transition and is well positioned to capitalize as a leader in the space. Electron allocates capital globally to clean energy, infrastructure, and transitioning utility companies, which serve as key drivers, enablers, and beneficiaries of major structural changes affecting economies worldwide.

Electron won the Best Equity Hedge Fund Over $1 Billion at the 2022 Hedgeweek US Awards.

“The most significant investment opportunities in the coming years revolve around the Energy Transition, particularly within the US, as a result of recent catalysts poised to spur growth at an accelerated pace,” says Jos Shaver, Managing Partner and CIO at Electron. “The most impactful catalyst is the passage of the Inflation Reduction Act (IRA) in August 2022, which includes $369 billion of tax incentives dedicated to the development of clean energy. Specifically, solar, wind, batteries/energy storage, green hydrogen, and nuclear will be provided 10 years of visibility and accelerated growth via investment, production, and manufacturing tax credits.”

Electron believes the IRA’s impact on the US will be much quicker than markets currently expect, which will become apparent as companies integrate the tax incentives into their business plans over the next 12 months and raise growth expectations to incorporate the benefits of the legislation. Electron expects to begin seeing these revisions publicized in the market in the coming quarters once the IRS releases the rules and regulations associated with specific tax incentives and how companies can qualify for them.

As of September 30, 2022, Electron is meaningfully positive for the year, up approximately +5% (net), significantly outperforming the MSCI All Country World (-27%), S&P 500 (-25%), and MSCI World Utilities (-16%) indices. Furthermore, Electron’s 3-year annualized return is approximately +19% (net), which is significantly outperforming the MSCI All Country World (+2%), S&P 500 (+6%), and MSCI World Utilities (-2%) indices.

“Our ability to capture upside, while preserving capital on the downside, is a key hallmark of the strategy – not just in today’s challenging market, but in all markets,” details Shaver.

Electron believes volatility is likely to persist and that active investment and risk management, diversification, and stock selection (long and short) will be paramount for near to medium-term performance.

Shaver states: “At the end of the day, it all comes down to generating outsized returns and alpha, while minimizing risk and volatility for investors. Over the past decade, the hedge fund industry has struggled to generate attractive returns relative to broader equity markets. However, as investors experienced a challenging global macro-economic environment and intensified volatility, we’ve seen the appetite for hedge fund allocations gain momentum, particularly within the long/short equity segment.”

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