Quant Manager Mark Carhart to Start Third Climate Hedge Fund

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(Bloomberg) — Quant hedge fund manager Mark Carhart is starting a third fund that seeks to profit from efforts to address climate change.

The Carbon Evolution Fund will trade securities such as California Carbon Allowances and derivatives tied to the Regional Greenhouse Gas Initiative and European Union Allowances for emissions, said a person with direct knowledge of the new offering from Kepos Capital. 

Billionaire Jeff Skoll’s Capricorn Investment Group invested $100 million in Kepos’s new fund, the person said. Capricorn, which focuses on sustainable investing, didn’t respond to an email seeking comment and telephone messages couldn’t be left. 

Carhart is managing the fund with Kepos co-founder Bob Litterman, who has advised the government on climate risks and is chairman of the Commodity Futures Trading Commission’s climate-related market risk subcommittee. A spokesman for Kepos, which manages about $2 billion out of New York, declined to comment.

Two years ago, Kepos started a fund that seeks to profit from the transition to a low-carbon economy. The fund generated a 23% gain in 2021. And last year, Kepos introduced a fund that trades carbon allowances. It gained 26% in 2021 and 5% this year through June, the person said.

Carhart once co-ran Goldman Sachs Group Inc.’s biggest hedge fund. He left Goldman in 2009 and opened Kepos the following year with Litterman, who was once the bank’s top risk manager and is known on Wall Street for co-inventing a method for allocating assets within portfolios. Giorgio De Santis is also a Kepos co-founder.

The hedge fund focuses on trading strategies related to macro-economic trends, statistical arbitrage and market volatility.

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