Hedge Fund Vet Launches First U.S. 'Green' Fund Of Funds

By Billy Fisher | October 22, 2009 AAA

The hedge fund circle has been placing a greater focus on investment opportunities in the clean energy space, and hedge fund veteran Richard Bookbinder is at the forefront of this trend.

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On The Radar
Bookbinder is the managing member of Bookbinder Capital Management, which he formed over 10 years ago. His firm focuses exclusively on investing in hedge funds and recently rolled out TerraVerde Capital Partners, a fund of funds that invests only in green hedge funds. "As part of our overall research process, we started looking at the green space about two years ago," Bookbinder said in an interview.

A key driver advancing the clean energy theme that Bookbinder points to is the rising price of fossil fuels. The United States Oil Fund (NYSE: USO), which tracks the price of crude, has gained 75.5% since bottoming out in mid-February. This price movement, taken together with a growing global awareness of the need to reduce carbon emissions, bodes well for companies positioned in the green space. "It's the perfect storm for clean energy investing," Bookbinder said. (For related reading, check out Go Green With Socially Responsible Investing.)

Corporate America Goes Green
With a Senate panel slated to begin climate hearings later this month, Bookbinder acknowledges that the political climate for clean energy is improving. In the meantime, Bookbinder expects that the green movement will continue to grow given the contributions of other stakeholders. "I think the real progress here in the U.S. is being made at the state level," he said. "California, in particular, has been very active in this area over the past twenty or so years."

Government action is only one piece of the equation that Bookbinder believes will benefit the green movement over the long term. The more important part of the theme is Corporate America beginning to step up, he said.

Bookbinder cites General Electric (NYSE: GE) CEO Jeff Immelt as a major proponent in Corporate America for clean technology. GE's Energy Financial Services arm has made significant equity investments in A123 Systems (Nasdaq: AONE), a maker of next-generation lithium-ion batteries that has seen its stock price soar 38.8% since its IPO in September.

Abundant Alternatives
Individual investors interested in green investing but with no access to hedge funds still have plenty of options available. For example, the PowerShares WilderHill Clean Energy Fund (NYSE: PBW), which has risen 91.2% since March 6, is an ETF that holds a basket of stocks focused on the clean-energy space.

In terms of individual stocks, First Solar (Nasdaq: FSLR), a leader in the solar module market, is just one example of a solar company that has seen its profits trend upward as it continually refines its manufacturing process. (For further reading, check out Spotlight On The Solar Industry.)

Bottom Line
Although Bookbinder has an outlook generally favorable toward green energy, he acknowledges that companies positioned in this space will not have it easy. "A lot of these companies aren't going to make it," he said. "Investing opportunities exist on the short side as well."

The notion that the clean energy movement has attracted the interest of hedge fund money adds legitimacy to the space and indicates the trend is gaining momentum. As green technologies continue to evolve and become more profitable, as has been the case with solar power, investors who got in at the ground level stand to reap significant gains. Potential new investors should do their own due diligence before investing in clean energy. Bookbinder's mention of short opportunities in this area underscores the risk level associated with clean technology plays.

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