Deutsche Asset Management, the $800bn fund unit of Deutsche Bank, plans to launch the world's first private equity fund specialising in climate change, or green investments. "We're developing the product," Kevin Parker, DeAm chief executive, told the Financial Times. "We are already the biggest climate change investors in the world. That has happened really in just the past 18 months." The move dovetails with DeAm's commitment to climate change as a potentially huge investing trend and with its desire to develop more products in the higher-margin end of the asset management business. DeAm last year took a minority stake in a private equity firm. It also launched a private equity funds of funds. The green fund will be its first direct private equity fund. "The $12bn we have in climate change is almost exclusively retail," said Mr Parker. "We want to broaden this to institutional. We intend to be leaders in the space in both retail and institutional." "For us to go into private equity today, with no track record and so many established players already there, is probably not a smart move," he said. However, climate change was a new area and uncharted territory. "Nobody has a track record, so we could be at the starting line with Carlyle and Blackstone and the other big guys." He said climate change investing incorporated a broad spectrum including green technology, agriculture and infrastructure related to alternative energy. "It lends itself to multiple products to create. We can roll them up into a diversified strategy around climate change." Financiers and insurance companies, he added, were starting to recognise the problem of carbon emissions and fossil fuels and this would result in rapid change in the area. "If you can't finance it and you can't insure it, it probably isn't going to get built." Mr Parker said asset management divided increasingly between low-margin indexed products and high-margin absolute return products, with hedge fund-like strategies offering performance incentives. "On one side you have exchange traded funds and on the other you have [private equity firm] Blackstone and the hedge funds," he said. "It leaves firms like ours, traditional long-only buyside firms, needing to make some very tough decisions. The growth in the traditional segment is far outdistanced by the growth in passive strategies and by the growth in alternative strategies. "You're going to have absolute return products and you're going to have passive products - and what's left in the middle is an endangered species." Copyright The Financial Times Limited 2008