Salt Funds Management plans to list a dedicated carbon fund, opening up the green commodity directly for retail investors.
Salt's Carbon Fund is expected to be 98 percent invested in carbon commodities, with 2 percent held in cash and equivalents. The fund will buy credits in New Zealand's emissions trading scheme and also in international schemes. It may use swaps, futures and other derivatives to get exposure to those markets.
The offer is expected to open next week but isn't seeking money yet. Salt plans to list the Carbon Fund on the NZX next month.
"This fund positions carbon as a new alternative asset and aims to give individuals and organisations a chance to invest in or offset these changes," managing director Paul Harrison said in a statement.
Provided the offer gets Financial Markets Authority approval it will be the first listed green investment entity in New Zealand. The units will be sold at $1 each with a minimum $5,000 investment.
NZX has been keen to foster a wider use of green investment tools and vehicles, with a growing number of green bonds listed on the debt market. At the same time, the government is charging ahead with its Carbon Zero legislation. The Crown's provisioning for emissions trading scheme credits rose to $2.54 billion as at June 30 from $2.03 billion a year earlier, with the carbon price rising to $21.10 per unit from $17.20 in June 2017.
The Carbon Fund will be at the high end of the risk register in that it's asset-specific and the product disclosure statement says it won't be appropriate for all investors, with a number of factors influencing prices such as political decisions, regulation, fuel prices, and weather and climate change.
"The historical carbon price has been quite volatile relative to traditional asset classes such as shares and bonds," the offer document said. "Price fluctuation plays a significant role in the carbon market and carbon dioxide emissions reduction."
Salt Funds will charge about 0.95 percent of funds under management to cover management and administration costs.
The fund manager won't measure the fund's performance against an index, saying there isn't an appropriate peer group.