September 19, 2007 — In a bid to sniff out illegal insider trading, the Securities and Exchange Commission is demanding hedge funds cough up new information, including relationships between their managers, family members and publicly traded companies.

The new, more probing line of questioning about ties considered possible red flags for bad behavior was included in a 27-page letter the SEC sent out to hedge funds.

As part of the letter, the federal agency is asking hedge fund executives to spell out whether their firms have any clients, employees or relatives who serve as directors or officers of public companies.

The SEC also wants hedge funds to list all corporate executives or officials at brokerage firms that have invested in their funds.

And it’s seeking a detailed description of any deals that fund managers were asked to consider but turned down because they might have been illegal or unethical.

“The goal is to be proactive,” March Schonfeld, who oversees the SEC’s New York office, told The Post. “If problems exist, we want to find them.”

So far, the letter has gone out to about two dozen hedge fund executives registered with the SEC whose funds were due for a routine inspection.

The increased scrutiny comes as suspicious trading activity ahead of the announcement of big mergers - information that hedge funds might be able to get their hands on - appears on the rise.

Illicit trades can be masked behind complex strategies involving the options market and credit default swaps.

The SEC began its stepped up effort to ferret out illegal insider trading earlier this year by trying to figure out how information gets swapped among hedge funds, brokerage firms and other companies.

The SEC itself faced some heat last year from Congress after a former lawyer at the commission alleged his superiors interfered with an insider trading investigation involving a major hedge fund and a top banker.

IF WATER is “blue oil”, then the industry may be at the start of a wildcatters’ rush.

Take BlueScope Water. The waiting time for its rainwater tanks has stretched to 10 weeks, up from about a month this time a year ago. And that’s after the company, a division of BlueScope Steel, tripled production in Victoria, with a further doubling planned to 200 tanks a week by December.

Melbourne’s water reservoirs began shrinking over the weekend, and are likely to drop below 40 per cent capacity within days, about two months earlier than last year. Unlike the debate over how to halve carbon emissions over the next four decades or so to forestall dangerous global warming, the need for urgent water conservation is accepted by farmers and city-folk alike.

Not surprisingly, the business of supplying water-saving products such as drip-feed irrigation systems to keep everything from crops to sporting ovals alive is booming.

“It’s growing hand over fist,” said Chris Harkness, manager of the Thomastown branch of Water Pro’s, a distributor of water tanks and irrigation systems. “Australia’s becoming a drier continent whether we like it or not.”

Mr Harkness spoke at last weekend’s Save Water Save Energy Expo in Melbourne, which drew thousands keen to make their homes and businesses more efficient.

The industry, though, is already facing growth strains. “There’s no university course, no apprenticeship and no formal training” for much of the industry, Mr Harkness said. One consequence is consumers can find it hard to assess the competence of suppliers.

Much the same is true for investors prospecting for profit.

Fund managers of the MFS Water Fund last week noted that with the main water companies all in state hands, there are relatively few investment opportunities in Australia. Even for BlueScope Steel, Cranes Group and Hills Industries, which are among listed companies providing water-related products, such business makes up only a portion of their total.

The same is largely true overseas. For investors looking at mid-cap companies with a market value of between $US250 million ($A280 million) and $US1 billion, there only about 130 companies globally to pick from, said Martin Kloeck, chief investment officer of Signina Capital, one of the MFS fund’s six specialist managers.

Nevertheless, the MFS fund, which claims to be Australia’s only actively managed and internationally diversified water investment fund, plans to increase tenfold to $200 million by June 2009. It may also establish a private equity fund, said Craig McIntosh, investment manager for the MFS Water Fund.

The sums needed for investment on water infrastructure are huge, including some $30 billion earmarked for desalination plants and new pipelines in Australia over the next decade.

Globally, the figure was $US355 billion last year, and will grow to $US1.2 trillion by 2025, said Mr McIntosh, citing Credit Suisse data.

And, notes Mr McIntosh, unlike oil, water is more than merely scarce: “Water cannot be substituted, nor can its use be deferred.”

«www.bluescopewater.com»

«www.mfsgroup.com.au»

«www.bluescopewater.com»

«www.mfsgroup.com.au»

PARIS: In booming economies from Asia to Eastern Europe, cement is the glue of progress. The material that binds the ingredients of concrete together, cement is essential for constructing buildings and laying roads in much of the world.

Some 80 percent of cement is made in and used by emerging economies; China alone makes and uses 45 percent of global output. Production is doubling every four years in places like Ukraine.

But making cement creates pollution, in the form of carbon dioxide emissions, and the greenest of technologies can reduce that by only 20 percent.

Cement plants already account for 5 percent of global emissions of carbon dioxide, the main cause of global warming.

Compounding the problem, cement has no viable recycling potential, as the abandoned buildings that line roads from Tunisia to Mongolia demonstrate. Each new road, each new building, needs new cement.

“The big news about cement is that it is the single biggest material source of carbon emissions in the world, and the demand is going up,” said Julian Allwood, a professor of engineering at Cambridge University.

“If demand doubles and the best you can do is to reduce emissions by 30 percent, then emissions still rise very quickly.”

Worse yet, green incentives may be allowing the industry to pollute even more. The European Union subsidizes Western companies that buy outmoded cement plants in poor countries and refit them with green technology.

The emissions per ton of cement produced do go down. But the amount of cement produced often goes way up, as does the pollution generated.

Many of the worlds producers acknowledge the conundrum. “The cement industry is at the center of the climate change debate, but the world needs construction material for schools hospitals and homes,” said Olivier Luneau, head of sustainability at Lafarge, the Paris-based global cement giant.

“Because of our initiatives, emissions are growing slower than they would without the interventions.”

Cement manufacturers have invested millions of dollars in programs like the Sustainable Cement Initiative, yet many engineers like Allwood see “sustainable cement” as something of a contradiction in terms, like vegetarian meatballs.

Lafarge, a leader in introducing green technology to its field, has improved efficiency to reduce its emissions from 763 pounds, or 347 kilograms, of CO2 per ton of cement in 1990 to 655 in 2006. Its goal is to get to 610 by 2010, but it expects it will be difficult to get much below that number.

Lafarge, which bought 17 cement plants in China in 2005 and has holdings throughout eastern Europe and Russia, acknowledges that its emissions are growing year by year.

“Total emissions are growing because the demand is growing so fast and continues to grow and you cant cap that,” Luneau said. “Our core business is cement, so there is a limit to what we can change.”

Cement is certainly a good investment these days.

“The construction market is booming in Eastern Europe, so cement factories are booming,” said Lennard De Klerk, director of Global Carbon, a Budapest firm that arranges investments in Ukraine, Russia and Bulgaria. “All the big cement companies, like Lafarge and Heidelberg Cement, have bought existing facilities there that generally use fairly outdated technology and that waste a lot of energy.”

Carbon trading schemes - green incentives created by the European Union and the Kyoto Protocol - encourage such purchases. But they also allow manufacturers to increase overall cement production, both in the developing world and at home.

The European Union effectively limits production of European cement makers in their home countries by capping their allowed yearly emissions. In places like Ukraine, meanwhile, there are no limits, so cement production can increase there without regulatory caps.

Moreover, European companies get allowances known as carbon credits to pollute more for use at home by undertaking green cleanup projects elsewhere. So buying an old Soviet factory and investing in converting it to green technology can bring multiple paybacks.

“They can invest in Ukraine and Russia, clean up, and earn carbon credits - the investment is much more attractive than it used to be,” said De Klerk, whose company brokers such “carbon” investments. Factoring the value of the carbon credits into the cost of refitting a factory in Ukraine, the predicted rate of return rises from 8.8 per cent to close to 12 per cent, he said.

Once outmoded plants are refitted with “clean technology,” their emission per ton of cement produced does decline. The Podilsky plant in Ukraine is being refitted with greener kilns - financed by the Irish cement manufacturer CRH to earn carbon credits - and energy consumption per ton of production is forecast to drop 53 percent.