There is a new breed of funds moving into the clean technology sector – specialized hedge funds that have at least $750 million under management.
And they bring a new play – long and short – on the notoriously volatile sector.
But it remains to be seen whether playing the growth sector’s zigzags is more profitable than patient investment in the sector’s broader upward trajectory.
“It is an interesting philosophical difference,” notes Angus McCrone of London-based New Energy Finance, a leading provider of clean energy financial research.
“One is saying this is a huge growth story, let’s just put out money in and it will work out well in the long term, and the other is saying, well this is an exciting growth sector but there is going to be some big ups and downs, so let’s take advantage of the ups and the downs and try to get superior performance.”
Since most of the specialized funds are new on the scene – launching this and some last year – there's not much of a track record yet, says McCrone, who recently prepared a note about the by hedge funds - and funds-of-funds – into this sector.
There are at least half a dozen funds-of-funds now active in this sector, managing roughly $300 million, says McCrone, who also provided the $750 million estimate.
He said there was considerable variety, in size and investment strategies, within the expanding universe of specialized hedge funds, thought to currently number about 70.
The involvement of heavy-hitting funds is the latest evolution in a sector that launched at the turn of the decade, first with small boutique venture capital firms, such as Nth Power, followed by mainline Silicon Valley venture capital funds a few years later.
More recently, investment banks, private equity and mutual funds have joined the parade, and large hedge firms have also started devoting some of portion of their funds for clean tech.
Blackstone Group became the latest private equity group to jump in, announcing this week it had formed a new clean tech business group that will both make investments and advise the group’s other investment vehicles in renewable energy strategies.