Another hedge fund is betting that volatility and uncertainty aren’t going away anytime soon and is ratcheting back on stocks.
The latest example: the Electron Global Fund, an energy-focused fund. In its first-quarter client letter, obtained by Institutional Investor, chief investment officer Ran Zhou asserted: “We took proactive steps to reduce risk in the portfolio in early March.”
As part of this derisking strategy, Zhou said the firm reduced both gross and net exposures and redirected capital into more defensive utility positions, as well as attractive opportunities in Europe and Asia. According to an investor, the gross exposure was cut from 170 percent to 150 percent and the net exposure from 40 percent to 30 percent.
Electron was down 4.8 percent in the first quarter after generating a 21.5 percent gain in 2024, its best year since 2020. As of Monday, April 18, the fund is up 0.69 percent for the month, trimming its loss for this year to 4.14 percent, the investor says.
Jos Shaver founded Electron Capital Partners in 2005. In 2023, he resigned as CIO and managing partner but still owns the firm. Zhou now serves in Shaver’s former roles. At the end of the first quarter, the firm managed about $2.8 billion.
Electron has long emphasized three broad sectors: infrastructure, transitioning and clean utilities, and alternatives and clean energy. In early 2023, II highlighted Electron’s focus on the energy transition. As noted in the fourth-quarter letter, the hedge fund also has been a big beneficiary of “huge unprecedented power demand” in the U.S. because of artificial intelligence and the expansion of hyperscale data centers by companies like Amazon, Google, and Microsoft.
The firm noted in its latest quarterly letter that investment sentiment shifted quickly in late January when DeepSeek trotted out its AI model, which claimed to be more cost-efficient and less energy-intensive and touched off a big sell-off in AI plays, including power stocks. The sell-off accelerated in February and March.
“Investor concerns over stretched valuations and the sustainability of growth were key drivers of the sell-off,” Zhou stated in the recent letter. “Notably, several of Electron’s high-conviction holdings — despite in many cases having limited near-term exposure to AI — were swept up in the downturn due to their inclusion in broker-constructed custom AI baskets.”
These baskets included Constellation Energy, an independent power producer; Quanta Services, an electric-grid service provider; and GE Vernova, an electrical-equipment maker.
Then came President Trump’s so-far ill-fated tariff announcements, which have rocked the global markets over concerns about how the tariffs could impact businesses and supply chains. The firm said it “significantly trimmed exposure” to high-conviction AI and power names to preserve capital and “redirected capital” into more-defensive utility positions as well as “attractive opportunities” in Europe and Asia.
“Despite the near-term volatility, we remain confident in our medium- and long-term outlook for utilities, infrastructure, and select global markets,” Zhou said. “We believe the current market dislocations will create compelling investment opportunities moving forward.”
In fact, Zhou noted, electricity demand growth is accelerating based on many factors beyond AI. “These positions, though caught in the broader momentum unwind, have shown a clear divergence/decoupling between declining share prices and continued strong earnings and fundamentals — creating, in our view, compelling investment opportunities going forward,” he explained.
In the report, Electron also updated its sentiment on several positions. For example, U.S. utilities and power producers underperformed in the first quarter. But Zhou said the firm sees early positive shifts in investor sentiment across the sector: “We remain confident that strong tailwinds, such as surging power demand driven by electrification, data centers, the onshoring of industrial manufacturing, and the continued cost competitiveness of renewables, will support differentiated growth moving forward.”
Zhou also reaffirmed his bet on Xcel Utility, a regulated electric utility, asserting that given its access to inexpensive renewables, it is “well positioned” to benefit from surging demand for power while also providing much-needed defensive characteristics.
Within the electrical-grid infrastructure strategy, Zhou said that its position in GE Vernova “remains a core holding” and that it still sees “attractive upside potential” in Quanta, “a critical player for the build-out of electrical-grid networks in the U.S.”
He noted that Electron’s European positions made money in the first quarter and reaffirmed the bet on Veolia, a multinational water and waste management and energy service company. But Electron “slightly trimmed” its position in Alstom, a French provider of integrated transport solutions.