HITE’s carbon shorts prepped for new U.S. climate agenda

The $600 million hedge fund firm HITE Hedge Asset Management introduced a new strategy well in advance of President Joe Biden’s implementation of a climate agenda, and is prepared for even greater gains related to carbon-related trades in the new administration. “Combined with legislation that is now more likely given the Georgia result, we expect the impact of Biden’s plan will be to force the fossil fuel industry to internalize external costs, increase its cost of capital, permanently decrease demand for its products, and to remove the social license to generate banner profits during any potential upswing,” wrote James Jampel, founder of HITE, in a January 18 investor letter. The firm's HITE Carbon Offset fund implemented a short carbon strategy in the last two years to take advantage of the potential economic impacts for the energy industry due to climate change. HITE’s short carbon strategy was up 28% in 2020, despite an unprecedented rally in fossil fuels post-vaccine announcement. Since its June 2018 inception, the fund’s performance is approximately 52%, according to an investor letter obtained by Alternatives Watch. “This is existential for the planet,” said Jampel, a native of the Motor City, in an exclusive interview with Alternatives Watch in 2020. “We have the thesis that investment-grade energy credit is an oxymoron.” He said in his recent letter to investors that long-running trends like decarbonization need to begin at some point. For the HITE Carbon Offset, it’s a situation of how to sell the spike in price of energy rather than buying the dip. The relative opportunity set now looks better than it did at the beginning of 2020 for HITE -- and that's saying something, as 2020 was the best year yet for the strategy.

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