Hedge funds have seemed to be attracted by renewable energies. Not so much because of private equity engineering into renewable firms but because of their movements into low carbon related assets.
Since the launch of the European Carbon market there has been many hedge funds that have been active in these markets. Last year, Alfakraft AB, a Swedish hedge fund committed to a market making scheme for posting bids and offers for prices on carbon emission credits on the Nord Pool exchange, replacing EDF Trading Ltd., a unit of Electricite de France SA. Also last year OZ Bankers AG, a Swiss bank that’s part of OZ Holding AG, started a hedge fund trading at carbon-emission. But probably the most startling player in this market is Citadel, the Chicago base hedge fund reported to have taken a large long position on the C02 markets at the end of 2005. Probably this hedge fund had a good return on this investment if they timed well their exit and got out of the positions before these prices plummeted in April 2006. C02 prices have gone from over 30 euros per ton in April 2006 to just 6.40 euros at the end of 2006 . Citadel reported healthy returns in 2006 of over 30 %. Probably their C02 investments contributed to these returns.
But the most interesting movement by hedge funds has been the recent positioning of firms such as Citadel into the uranium industry. Though not a renewable energy, the low carbon economy challenge set by the European commission puts nuclear energy on top of the agenda. Other governments have embraced similar ideas. Hedge funds are expecting uranium price to hike, as many other commodities have done in the last two years. In the last five years uranium prices have soared 45 % per annum on average. This trend might keep on going. Low carbon economies are full of opportunities.