Alternatives briefs: Rescue bill, future Congress may boost alt energy

Alternative energy investments could soar because of $18 billion in tax and other federal incentives that were in the recently enacted $700 billion financial rescue bill, as well as more favorable green investing and renewable energy legislation from the next Congress, investment managers said Oct. 16 in a Social Investment Forum teleconference.

Ten of 14 social investment firms responding to an SIF survey plan or are considering funds by the end of next year focused on clean energy and clean technology investments.

Seventeen mutual funds or other investment portfolios offered by the respondents, with a combined $250 million under management, now focus exclusively on clean energy and clean-tech investing, Lisa Woll, SIF CEO, said at the teleconference.

All respondents to the survey, conducted in September and October, saw strong demand for investing in clean energy/clean tech, which is growing faster than the traditional investment management market, Ms. Woll said at the teleconference.

The new tax and other incentives to promote alternative energy were included in the Emergency Economic Stabilization Act, signed into law Oct. 3.

Jackson Robinson, CIO at Winslow Management, an environmentally focused manager, said at the teleconference, “Despite the economic problems we all face, Winslow remains extremely optimistic about clean energy.”

Adam Seitchik, CIO at Trillium Asset Management, a socially responsible investment firm with “green” funds, said at the teleconference that the next Congress could enact a carbon and other taxes on fossil fuels, raising oil and other traditional energy prices, as well as providing more alternative energy incentives, all aiding clean energy’s competitive position.

SIF is an association for the social investment industry, comprising some 500 mutual fund, banking and research companies as well as foundations and other investment-related institutions.

Highland Capital Management is shutting down two of its five hedge funds, the $1 billion Crusader Fund and the $500 million Credit Strategies Fund, according to a source familiar with the situation.

The decision followed recent painful declines for Crusader, a corporate distressed debt fund, and Credit Strategies, a multistrategy high-yield fund, and reflected in part Highland executives’ conclusion that hedging, funding and shorting would continue to be constrained. The funds will be unwound in an orderly manner over the coming four years, said the source, who declined to be identified.

From inception through the end of 2007, both funds had delivered annualized returns of more than 20%.

Highland spokeswoman Denise DesChenes declined to comment.

Private equity funds returned -1.51% in the second quarter, down from -0.87% in the previous quarter, the first back-to-back negative quarters since the October 2000 to March 2003 downturn, according to State Street Corp.’s Private Equity Index.

By comparison, private equity produced an 8.55% internal rate of return in the second quarter 2007.

Hedge fund investors redeemed at least $43 billion in September, according to TrimTabs Investment Research’s weekly flow report.

Hedge funds returned -19.9% from June through September, the worst performance since TrimTabs began keeping records in 2000. TrimTabs’ preliminary estimates were based on a survey of 1,639 funds, amounting to 39% of the hedge funds covered by BarclayHedge.

La Fayette Investment Management (U.K.) launched a new niche hedge fund of funds that invests in global macro strategies.

The company seeded the new fund with corporate capital, according to a news release.

Andre Pierre Visser, La Fayette’s founder, chairman and CIO, manages the new fund of funds. Mr. Visser and his team currently are allocating assets to seven underlying global macro managers using discretionary, systematic and volatility strategies. The fund’s initial capacity limit is $500 million.