In the fall, Jeff Bortniker former ceo of XL Weather & Energy, set up Pyrenees Capital Management in Stamford, Conn. with two partners specifically to trade weather derivatives. "It's a market that has a lot of negative correlation to traditional investments like foreign exchange, interest rate and equities," said Bortniker.
Nicholas Ernst, a weather markets director with Evolution Markets, an advisory and brokerage service for environmental products based in White Plains, N.Y., said after the collapse of Enron, the weather market has become less centered around energy companies. Hedge funds are increasingly looking at weather derivatives as a means of hedging or spreading exposure, noted Ernst. Market participants who bought natural gas may buy a weather derivative to hedge against the occurrence of warmer weather. "That's a big change," he said.
