Man Group, the world's biggest hedge fund manager, has built on its green credentials with the launch of a joint venture backed by the Abu Dhabi Government aimed at harnessing gases wasted during oil production.

The International Petroleum Investment Company, owned by the Middle Eastern Government, has committed to invest an initial $300 million (£152 million) into the MENA Associated Gas and Global Environment Fund.

The new fund will invest in projects that make use of the highly damaging gas that is burned, or flared off, during oil production.

According to the World Bank, flared-off gas adds 350 million tonnes of CO2 to the atmosphere each year, substantially adding to the creation of greenhouse gases each year, Man said yesterday.

MTM Capital Partners, a Man Group subsidiary, will manage the fund, which it is hoped will eventually reach $1.5 billion.

It is likely that only City institutions will be invited to subscribe, while Fluor, the engineering and construction group, will be the technical partner.

Peter Clarke, Man's chief executive, launched the fund yesterday at a ceremony in Abu Dhabi attended by several Middle Eastern dignitaries, including Mohamed bin Dha'en Al Hamili, the Energy Minister.

Mr Clarke said that there was "a keen appetite" among investors for investments that help to protect the environment while aiming for attractive returns.

The fund's target return on equity was not disclosed.

The launch of the fund follows the creation by Man of its Eco fund management business, aimed at backing environmentally linked investments.

It also follows the launch by Man of the China Methane Recovery Fund, a private equity-like fund that raised €400 million to invest in projects in the country.

Alternative investors, particularly hedge funds, are exploring new ways of investing that are not correlated with stock market performance and have considered investments in fine art as well as in antiques or collectible guitars.

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