Quant trader seeks $1.5B for climate-change hedge fund
David Vogel, a pioneer in using machine learning to trade, is seeking $1.5 billion for a new fund that will analyze big data to find investments linked to climate change.
The Voloridge Sustainability Fund will focus on companies affected by events such as floods, fires and natural disasters; firms that invest in efficient technologies; and electric-car makers and their suppliers, according to a person familiar with the matter. The fund started trading this month with internal capital.
Vogel, who spent the past five years using data to study the impact of global warming, is starting the fund as pension plans and other large investors are increasingly seeking out ESG investments. Hedge funds, however, have been slow to adopt such strategies.
About 30% of the Voloridge fund’s risk will be attributed to the three climate-related strategies, with the remainder made up of Voloridge Investment Management’s medium-term equity strategy — but include ESG rules and rankings. That strategy holds the average trade for about 45 days.
The “materiality of risks with not considering" the strategy is the primary consideration for its implementation, a UBS survey finds.June 17
The actively managed vehicle will invest in about 100 companies.May 14
Taking on ESG presents fresh challenges for a $3.1 trillion industry that has grappled with sub-par returns.April 17
The new fund will also be market neutral — bets on rising shares will be matched by wagers on falling stocks — and invest in companies that are more efficiently spending money on sustainability and ways to address environmental issues, while wagering against those that aren’t. It will short industries usually excluded from ethical investing, such as firearms, tobacco and casinos, but won’t take long positions on them.
Vogel began his quantitative money management career after he was discovered during a Netflix coding competition in 2007. He set up Voloridge in the exclusive beachfront town of Jupiter, Florida, in 2009. Today the firm has $3.1 billion in assets and about 70 employees.
His interest in the effects of climate change goes beyond making money. In 2014, Vogel started the VoLo Foundation, a charity where he promotes research on the drivers and costs of climate change and advocates for solutions. After he and his family were displaced by Hurricane Irma, Vogel redoubled his efforts upon his return.
Vogel has produced double-digit returns. The $2 billion Voloridge Fund was up 37% last year, according to people with knowledge of the firm. The $1 billion Voloridge Trading Aggressive Fund, which is closed to investors, rose about 31%, they said.
The firm’s biggest challenge may be to convince the industry that a climate-change focused fund is worth the effort. Just 23% of hedge fund managers surveyed by JPMorgan Chase said they believed ESG policies would help them outperform, a concern shared by investors, according to a Schroders poll in October.
Still, climate change is fast becoming a focus in the finance world. In the past week, BlackRock joined an investor group that presses the world’s biggest emitters of greenhouse gases to change their ways, the New York State Common Retirement Fund hired its first sustainable investments director, while Goldman Sachs formed a sustainability council within its investment bank.