One man's trash is another's alpha.
Investment strategies in waste management — including trash collection, separation, disposal and recycling — are gaining institutional interest as landfills globally are reaching capacity at the same time that commodity prices are skyrocketing, according to analysts and managers.
“Clearly rising prices (in raw materials) have made all the recycling much more profitable and interesting,” said Jvan Gaffuri, senior equity analyst at SAM Research AG. SAM Research is a subsidiary of SAM Group Holding AG, an asset management company based in Zurich, with 8.5 billion Swiss francs ($8.2 billion) at year-end 2007.
In addition, stricter disposal and recycling regulations caused by limited landfill space throughout the world, particularly in Europe, have increased the cost of waste management. Technological advances have also made the process of converting waste into reusable energy or raw materials more efficient, investment managers said.
“The biggest opportunities are in waste (energy) and recycling,” said Kimberly Tara, chief executive officer of FourWinds Capital Management, a Geneva-based alternative asset management firm specializing in global commodities and natural resources with $1.6 billion in assets under management as of June 30.
In July, the Abu Dhabi government-owned International Petroleum Investment Co. invested $300 million in a fund that invests in projects that convert gas emitted from crude oil production into electricity and other products, confirmed a source close to the IPIC who declined to be named.
The fund, which aims to raise $1.5 billion, is managed by MTM Capital Partners Ltd., a subsidiary of London-based Man Group PLC, which is the world's largest listed hedge fund with about $78 billion in assets under management.
Rikky Hasan, managing director of MTM, declined to comment.