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September 25, 2019  

Narrowly Focused Fund Lifts Segra's Assets

In a clear sign of investor appetite for niche strategies, a fund that trades the shares of companies in the nuclear-fuel sector has raised nearly $100 million since launching last year.

Segra Capital of Dallas has stopped admitting new investors to its Segra Resource Partners fund after capping a founders share class with discounted fees. The fund counts several pension plans among its limited partners. Strong demand for the offering has boosted Segra’s overall assets to about $130 million.

Segra founder and fund portfolio manager Adam Rodman has been telling investors that the vehicle is the first hedge fund targeting the nuclear-fuel sector to launch since the Fukushima nuclear disaster in 2011. It’s no wonder, given the sector’s dramatic contraction in recent years.

Consider that the number of uranium miners has fallen from about 400 to just 40, while the total market capitalization of uranium stocks has dropped from about $125 billion to only $11 billion. At the same time, the price of uranium has plummeted from a high of $136 per pound in 2007-2008 to $26 — well below the radioactive metal’s marginal cost of production.

“As a result of low prices, significant supply cuts have taken place over the past 18 months, putting the market in deficit for the first time in 30 years,” according to marketing materials for Segra Resource Partners.

And the uranium market is largely opaque, with virtually no sell-side coverage and only a trickle of buy-side research coming out of Australia and Canada.

“The uranium market is . . . difficult for generalist investors to understand,” Rodman wrote. “There are no traded futures [and] material is transacted in bespoke bilateral contracts rather than the open market. Uranium cycles do not closely mirror other commodity markets.”

Rodman likely will reopen the fund to additional investors as the market recovers — something he expects to happen over the next 6-18 months. He believes the strategy has the capacity for up to $200 million of investor capital.

Rodman, who founded Segra in 2013, has been investing his own money in the sector for more than 10 years. He previously was a partner and senior analyst at Corriente Advisors, a Fort Worth, Texas, global-macro manager, and earlier worked in investment banking at Bank of America. At Segra, he is assisted by Arthur Hyde, head of research, who previously covered the utility sector as an analyst at J.P. Morgan.

Mike Fabiano, who worked with Rodman at Corriente, is head of investor relations at Segra.

Segra Resource Partners holds 8-12 long positions and no shorts — a stance it considers appropriate at this stage in the uranium cycle. The fund, which launched in July 2018, gained 12% in the second half of last year, but is down about 10% year-to-date. Limited partners are subject to a two-year lockup.

Segra runs another vehicle, Segra Capital Partners, that takes an opportunistic approach to investing in multiple assets globally. That vehicle, with about $30 million under management, recently profited from a short bet on Argentina’s sovereign debt.