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8 Jan 2007

Hedge Fund buys Access to Energy Trading and Delivery

Highbridge Capital Management, a $17 billion hedge fund is reported to have taken a $1 billion equity stake in the energy business of Louis Dreyfus Group, the old-line commodities trading firm, in a deal worth about

Highbridge Capital, which is majority owned by JPMorgan Chase, said it invested in Louis Dreyfus to gain more access to energy delivery and trading markets on its own. “We saw this as a real opportunity that is uncorrelated to everything else we’re doing,” said Glenn Dubin, managing partner of the hedge fund. He explained that he had considered trying to get the hedge fund into the energy trading business more heavily on its own, but concluded, “there was no way we could do this by ourselves.”

Highbridge and Dreyfus will jointly manage the venture, which will be called Louis Dreyfus Highbridge Energy and maintain its headquarters in Wilton, Conn. Before the Highbridge investment, Louis Dreyfus Energy was one of the 10 largest natural gas marketers in the United States and had worldwide interests in both the physical delivery of petroleum and natural gas as well as financial interests in energy.

JPMorgan Chase bought its stake in Highbridge in 2004 to gain exposure to the fast-growing hedge fund sector. The deal proved to be well-timed, as pension funds and other institutions continued to pour billions in to hedge funds, including Highbridge.

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