Earlier this year, portfolio managers Vidar Kalvoy and Joel Etzler renamed their fund from Coeli Renewable Opportunities to Coeli Energy Opportunities – a move intended to better reflect the broader investment universe the duo has been targeting. Their opportunity set extends beyond traditional renewables such as solar, wind and hydropower.
“One of the most important things for the continued expansion of both renewables and electrification in general is the expansion of the electricity grid and all the equipment and services that support it,” the managers of the long/short equity fund Coeli Energy Opportunities tell FinansWatch in Sweden. “On the long side, we’ve had a lot of exposure there in recent years and continue to do so. It’s been a very profitable area for us.”
Explaining the growing need for energy infrastructure beyond pure renewables, Etzler points to aging grid systems across the Western world and the structural shift in energy production. “We need grid expansion, partly because the grids across the Western world are becoming very old, and partly because we as a society are investing heavily in renewable energy,” says Etzler. He goes on to emphasize that “we’re shifting from a system with a few large power plants to one with many small ones.” That shift requires more cables, transformers, and other equipment.
“We need grid expansion, partly because the grids across the Western world are becoming very old, and partly because we as a society are investing heavily in renewable energy.”
The accelerating growth of AI and data centers has further fueled electricity demand, while energy security has become a more pressing issue since the war in Ukraine. “We’re investing in the broader electrification race,” notes Etzler. “A few years ago, it was almost exclusively about the climate transition. What has changed now is that the climate is no longer the primary driver in this sector.”
After years of managing energy-focused market-neutral strategies, Kalvoy and Etzler transitioned in early 2023 to running a long-biased long/short equity fund dedicated to renewables and the wider electrification theme. Despite a tough environment for renewable stocks, Coeli Energy Opportunities has fared well, returning 21.5 percent since its launch in February 2023 through the end of May this year. The fund’s strong relative performance reflects, in part, an approach that goes beyond headline demand trends – emphasizing a detailed analysis of both supply and demand dynamics within each targeted sub-sector.
“Our investment process is based on analyzing the various sub-sectors within the broad energy sector. We then try to understand where the supply-and-demand balance is improving or deteriorating,” Etzler tells FinansWatch. While many investors focus heavily on demand, Kalvoy and Etzler argue that supply is just as crucial – especially in commoditized energy markets.
“We then try to understand where the supply-and-demand balance is improving or deteriorating.”
“If you have a lot of demand for something, it doesn’t always mean it’s good, because if you have even more supply, prices will still fall,” explains Etzler. “It’s not always good when governments throw a lot of money at a problem, because it lowers the barriers to entry for new players and the existing companies that deliver good products face more competition,” he continues. He cites the solar industry as an example, where demand seemed insatiable, but supply surged even more.
“There were entire hangars in Rotterdam full of solar panels that were basically being given away,” he recalls. The strategy might sound intuitive, but Etzler believes it’s often overlooked. “Understanding this balance is extremely important. Many people look at demand but don’t analyze supply carefully enough, especially changes in supply.”
