Most Innovative product: Winner

Founded in 2005 as a specialised subsidiary to Arbat Capital Management of Moscow, I2BF is a London-based international fund management group focusing on venture capital and public equity activities in the US, Europe and Asia Pacific, specifically in the clean energy.

The hedge fund arm of I2BF, launched in 2008 is the newest addition to the company and integrates its knowledge of technology, fundamentals and quantitative methods to hone what the company terms “a mixed-strategy public markets approach” to investment.

The I2BF Technology Fund aims to provide superior risk- adjusted returns in the renewable energy theme through long/short investments in listed equity securities, and to do so irrespective of commodity price cycles and the changing economics of alternative energy sources.

The product is designed to give investors in the fund as well as limited partners wider access to a rapidly growing renewable energy sector, according to the fund managers Irakli Menabde and Nicolas Merzeau.

Given the increasing pressure being placed on governments worldwide to focus on reducing their carbon footprints, the managers believe the prospects for the clean technology sector are looking increasing favourable.

Both believe the world is entering an environment of great change in the way energy is generated and used. This will be accompanied by demographic trends that will create investment opportunities, given the conflicting forces of rising resource demand and the push for greater environmental responsibility, according to Menabde and Merzeau.

The fund managers also have a competitive advantage through their interaction with the group’s venture capital fund. This is a diversified clean energy investment fund working closely with the management of companies in the sector. It also has experience of investing in clean technologies since 2005.

Menabde and Merzeau use a long/short equity investment approach with varying net long bias with the aim to provide long-term returns greater than renewable energy benchmarks, with less volatility.

The fund’s investment methodology combines quantitative, thematic and fundamental disciplines is a combination the managers think should bring good returns.

The fund primarily uses continuous quantitative research to improve the fund’s investment process the managers highlight their use of back-tested and proven stock selection - nevertheless, the combination of the quantitative, thematic and fundamental disciplines means when necessary, the managers can react swiftly to any adverse market activity by adjusting their long/short bias on a discretionary basis.

Menabde and Merzeau say they add value by having proven ability to identify consistently and systematically the best relative investment opportunities within their specific equity universe. They avoid going net short as they make a long-term call and want to offer investors long-biased exposure. However, the bias can be adjusted depending on market conditions and sector valuations.

The quantitative stock selection model covers a broad investment universe of over 300 liquid and investable equity securities and a diverse range of liquid exchange traded funds (ETFs) and derivatives.

The managers aim to reduce risk through hedging of market risks, saying their returns have demonstrated low correlation to renewable stock benchmarks as well as crude oil.

The fund’s assets under management more than doubled from $10.5 million in January 2009 to $27.5 million by the end of the year. That, believe the managers, was a vote of confidence in the strategy.

Fund facts: I2BF Technology Fund

Full name of fund: I2BF Technology Fund
Name of portfolio manager: Irakli Menabde and Nicolas Merzeau
Name of investment/management company: I2BF
Contact information: Suite 401, 1 Heddon Street, London W1B 4BD (+44 (0)20 7432 4516; www.i2bf.com)
Launch date: November 5, 2008
Assets under management: $26.5 million (at March 31, 2010)
Net cumulative performance since inception: 34.65% (at March 31, 2010)
Annualized return: 24.46% (at March 31, 2010)
Monthly standard deviation (since inception): 3.76% (at March 31, 2010)
Average monthly return (since inception): 2.04% (at March 31, 2010))
Strategy: long/short investments in listed equity securities focused on clean energy
Administrator: Custom House Global Fund Services
Auditor: KPMG
Custodian: JP Morgan
Prime broker: Morgan Stanley
Domicile: Bahamas
Listing: on several major exchanges in the US, Europe, Japan and selected emerging markets
Management fee: 2%
Performance fee: 20%
Minimum investment: $1 million
Lock-in: none
Redemption/liquidity terms: one month notice (31 days)