Reuters Italia – Overcrowding in traditional markets and the quest for higher returns has prompted hedge fund firm Dexion Capital to look further afield, at carbon emissions and electricity tradingand reinsurance.

Too much money chasing the same few opportunities in stocks and bonds over the past couple of years has hit average hedge fund returns, which slipped to around 7.5 percent last year from around 9.5 percent in 2004.

“A number of traditional hedge fund strategies have become increasingly crowded as a result of strong asset flows over recent years, which has led to downward pressure on returns,” Robin Bowie, chief executive of Dexion Capital, told Reuters.

“There has been a proliferation of new investment strategies. There’s the evolution of electricity trading and carbon emissions trading, which has developed as a direct result of the Kyoto Protocol.”

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Reuters Italia – Overcrowding in traditional markets and the quest for higher returns has prompted hedge fund firm Dexion Capital to look further afield, at carbon emissions and electricity tradingand reinsurance.

Too much money chasing the same few opportunities in stocks and bonds over the past couple of years has hit average hedge fund returns, which slipped to around 7.5 percent last year from around 9.5 percent in 2004.

“A number of traditional hedge fund strategies have become increasingly crowded as a result of strong asset flows over recent years, which has led to downward pressure on returns,” Robin Bowie, chief executive of Dexion Capital, told Reuters.

“There has been a proliferation of new investment strategies. There’s the evolution of electricity trading and carbon emissions trading, which has developed as a direct result of the Kyoto Protocol.”

Under Kyoto, about 40 countries including European Union nations, Russia and Japan have to cut emissions of heat-trapping gases including carbon dioxide by 5.2 percent below 1990 levels by 2008-12 in an effort to curb climate change.

“If you are a country or company producing more or less carbon emissions then you did in 1990, then you have to buy or sell them,” Bowie said.

“It’s created a secondary market with lots of opportunities … It is over-the-counter at this point.”

To invest in these hedge fund strategies, Dexion is due to launch a new fund of hedge funds — Dexion Alpha Strategies.

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