A new investment fund is seeking to raise $NZ50 million over the next two years to invest in “the clean energy boom.”

Named after New Zealand nuclear physicist, Ernest Rutherford, the Rutherford Innovation Fund will invest in young New Zealand pre-IPO companies where risk is reduced, investment capital is scarce and the potential returns are highest.

Milestone Capital opened the managed fund yesterday, which has a portfolio of private equity companies including algae fuel manufacturer Aquaflow Bionomic Corporation and carbon sequestration firm Carbonscape.

Milestone said about $US155 billion was invested globally in new clean technology in 2008 – a four-fold increase since 2004.

Milestone Capital principal and clean-tech mentor Nick Gerritsen said the clean energy boom was appealing to investors because it was new and emerging, with few big players.

The fund requires a $NZ1 million initial investment from institutional investors, who have the option of topping it up by another $NZ100,000 a month. Others need a $NZ50,000 initial investment, with the option of topping that up with $NZ5,000 every month for two years.

Principal Kenji Steven said some of the world’s biggest companies were investing with clean-tech start-ups. He said New Zealand had huge potential in engineering, scientific and technical skill, waiting to be realised.

Milestone had started the fund because traditional venture capital did not work for innovative companies. “It’s not about one deal – it’s about a portfolio of activity which will continue into the future.”

New Zealand Venture Capital Association executive director Colin McKinnon said there was a strong impetus to commercialisation of clean tech and the level of investment interest globally was strong.

“But it will be interesting to see what kind of models work,” he said. “It might be that investors have to be a little more patient, as commercialisation could take a bit longer to realise than areas like IT.”

He said most clean tech opportunities in New Zealand were early-stage, which was more difficult to attract institutional investment at the moment. “If New Zealand is able to discover some of the science and commercialise it, it will be globally useful in this space.”

He said there was also opportunity to attract offshore investment.