Hedge fund-of-funds managers Arne Schmidt and John Baillie are excited about the prospects for their SAR Environmental Fund, which opens Jan. 1.
The growth potential in this space is unlimited. There is truly fantastic return potential in this area, and the returns are generally uncorrelated with the rest of the equity markets, said Mr. Baillie, a hedge fund analyst at Systematic Absolute Return AG, Zurich, Switzerland. The firm manages $160 million for institutional and high-net-worth investors.
The investment team had to cool its heels a little before launching the fund. Because environmental hedge funds are so new, they had to wait 12 to 18 months for the funds to build a two-year track record, said Mr. Schmidt, founding partner and chief investment officer. About 70 hedge funds are now under consideration in agriculture and forestry, renewable energy, clean technology, water, carbon finance and microfinance sectors. In microfinance, for example, SAR will invest in hedge fund managers making microloans to Indonesian farmers to plant crops that can be used as biofuels.
Were ahead of the curve on this, making early-stage investments in niche environmental hedge funds. This is absolutely the next big thing, and it is huge, Mr. Baillie said.
As for how big is big, Messrs. Schmidt and Baillie report that SAR has investment commitments from high-net-worth investors and much interest from pension fund and other institutional investors, but no commitments yet. The investment process always takes so long with pension funds, but we think we will have plenty of institutional investors in the fund in time, Mr. Schmidt said.