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March 20, 2019  

Energy Investor HITE Dangles No-Fee Offer

Energy-focused HITE Hedge Asset Management is offering the ultimate fee discount for its latest hedge fund.

Investors whose contributions are among the first $25 million received by the HITE Carbon Offset fund would pay no management or performance fees for five years. Those who remain invested after that point would pay fees equal to 1% of assets and 20% of profits.

HITE Carbon Offset, which launched in June 2018, represents a bet by the Boston manager that the world will “decarbonize” more quickly than expected, punishing the shares of carbon-reliant businesses along the way. It’s a niche strategy for which HITE so far has raised just $6 million. The no-fee offer is designed to boost assets to the point where the fund would be fair game for smaller institutional investors.

HITE, which manages $820 million overall, is pitching the carbon-offset vehicle to investors with allocations for socially responsible investments. The fund takes short positions in the equity and debt of companies that are big producers or heavy users of fossil fuels, while taking long positions in non-carbon businesses — though not necessarily “green” energy.

HITE Carbon Offset gained 14.1% in the June-December period, followed by a 4.2% loss in the first two months of this year.

The fund is managed by co-chief investment officers James Jampel and Matt Niblack, who also run $800 million in the firm’s flagship vehicle, HITE Hedge. That fund, which invests in the shares of midstream energy businesses, has produced a 13.7% annualized return since its inception in 2004. It is currently closed to outside investors due to capacity constraints.

Jampel and Niblack also run a small fund called HITE Energy that has a broader mandate to invest in a variety of energy businesses. That vehicle, which launched in February 2018, gained 7.4% last year, followed by a 0.6% loss during the first two months of this year — with low correlation to energy indexes. The firm wants to hire an analyst to focus on the HITE Energy fund.

Jampel launched HITE’s flagship fund with $650,000 of his own money — and no prior experience as a money manager. He previously co-founded RoadLink USA, one of the largest independent intermodal trucking companies in the U.S. Niblack joined HITE in 2012 from Bain & Co.