Electron Global Fund is on pace for its best results in four years.
The hedge fund headed by Jos Shaver is up 16.03 percent for the year through May after surging 8 percent for the month. Electron has erased last year’s 9.8 percent loss and exceeded its 2022 and 2021 gains.
Electron Capital’s investing strategy was launched in 2005 as a stand-alone fund before it moved in-house to Steve Cohen’s former hedge fund, SAC Capital, in 2008. In 2012, Shaver and his partners spun out of SAC to relaunch Electron as a stand-alone hedge fund.
The Electron Global Fund is a long-short fund that emphasizes three sectors: infrastructure, transitioning and clean utilities, and alternatives and clean energy. In early 2023, Institutional Investor reported that it considered energy transition its No. 1 focus going forward.
“We believe the multidecade investment opportunity driven by the energy transition will be a particularly attractive differentiator for our universe of companies, as the underlying factors driving decarbonization and electrification are secular and not reliant on economic expansion,” the hedge fund firm said in a letter to clients .
The letter stressed that over the long term, energy transition is deflationary and therefore noncyclical, noting that renewable power is the cheapest form of generation in most economies worldwide. “Every watt of electricity purchased from wind and solar saves the customer money, and the need for lowering costs is even greater when economic conditions are challenging,” Shaver elaborated at the time.
Over the first five months of this year, longs kicked in about 20 percent to gains and shorts detracted 3.8 percent, according to a June investor report obtained by II. Infrastructure accounted for 11.6 percent of gains, all on the long side, and transitioning and classic utilities kicked in nearly 8 percentage points.
Alternatives and clean energy cost performance 3.6 percent. “Clean-energy sector experiencing a ‘hangover’ effect from ‘temporary’ 2023 headwinds,” Electron said in the letter, noting that it had shifted exposures at the beginning of the year with the goal of “mitigating volatility.”
For example, since year-end, it halved both long and short exposure to clean energy, to 10 percent of the portfolio. At the same time, it boosted exposure to infrastructure stocks, from 45 percent to 55 percent of the portfolio, the letter said, adding that it had “reallocated primarily into classic and green infrastructure.”
Exposure to utilities and renewable developers remained unchanged, at 35 percent. The overall portfolio’s gross exposure is currently 198 percent, up slightly from the previous month, and net exposure is 46 percent, unchanged from the previous month, according to the letter.
In the first quarter, General Electric — which does business as GE Aerospace, an aircraft engine supplier — became Electron’s largest U.S. long, accounting for about 10.5 percent of assets after Electron increased its stake by roughly 75 percent, a regulatory filing reveals. Sure enough, the stock is up about 63 percent year-to-date.
Constellation Energy, a producer of carbon-free energy and the second-largest long with 8.5 percent of assets, has surged more than 90 percent this year. Vertiv Holding, which provides power, cooling, and IT infrastructure products and services, has more than doubled in price this year. It is Electron’s third-largest long, making up about 8.3 percent of assets.
Electron noted in its June report that it had slightly boosted its exposure to clean energy and reduced its exposure to large winners by taking profits in the past month. It also identified investment opportunities for the following sectors this year: U.S. electricity/power demand, U.S. electric grid infrastructure, U.S. classic infrastructure, and U.S. renewable development. “Prospective losers” include auto/EV original equipment manufacturers, auto/EV suppliers, lithium battery manufacturers, and hydrogen.
