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By Gary M. Vasey, Ph.D.Vice President, Trading & Risk Management Utilipoint, gvasey@utilipoint.com

Over the last 12 months or so UtiliPoint, in conjunction with affiliate consultant, Global Change Associates, has followed the entry of hedge funds into the energy industry. The funds have been blamed by the media, politicians and others for running up the price of energy commodities through speculation activities. In 2004, energy commodity hedge funds returns seemed to bear out some of this sentiment as they made spectacular returns in the 20-100+ percent range, but 2005 has so far proven to be a much tougher year. Recently, a small number of funds (and investment banks for that matter) focusing on electric power and natural gas trading have apparently suffered large losses (estimates put losses at larger individual funds and the banks at between $100 million to as high as $1 billion). In recent weeks, several energy hedge funds have closed shop pointing to an inability to deliver on investment strategy in certain energy commodity markets.

Yet Interest in Energy Funds Continues To Grow Today, we are tracking more than 420 energy-focused hedge funds in the Energy Hedge Fund Center's Directory of Energy Hedge Funds . Each month, we add between 5 and 15 more funds that we have discovered. About half of these are funds in formation while the remainder are funds that have existed for some time. Since U.S. fund managers......................

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