TORONTO LONDON Oct 18 Reuters - Hedge funds that bet on a big comeback for commodities enjoyed soaring returns in the first nine months of 2021 as the world faced an energy crunch.
The average global macro commodities hedge fund is up 23.2% for the first nine months of the year according to data provider PivotalPath, a period saw the average equity energy hedge fund grow 12.3%.
Lockdowns and extended travel during the pandemic, along with a shift to renewable energy, led to underinvestment in oil and gas just as fossil-fuel demand rebounded sharply, boosting prices for fuels worldwide.
Brent oil price futures hit a three-year high in April at $85 a barrel. Natural gas and electricity prices have risen, particularly in Europe, where the benchmark wholesale gas futures at the Dutch TTF hub were up 400% from the beginning of this year earlier this month.
The volatile commodity markets, particularly the natural gas, where volatility measures hit a record this month. In September, trend-following hedge funds enjoyed strong gains from natural gas, according to UBS.
London-based long term hedge fund Westbeck Capital Management, which runs $230 million in assets under management, made 17.2% in September, bringing year-to-date returns to 94%, a firm spokesman told Reuters.
Westbeck increased its positions on exploration and production companies, in September to include Canadian Natural Resources, Baytex Energy Corp and MEG Energy Corporation, according to its August investment letter seen by Reuters. The Fund noted that the great summer pullback in oil and oil equities was a great buying opportunity.
Odey Asset Management made 40% in its long-short equities fund between the start of the year and from Oct. 15. The firm also bet on commodities. Auspice Capital, a Canadian computer-driven commodity funds, with a landed ROI of 30.5% in the year to Oct. 14.
Demand could soften in next decade as the world moves to green energy, but the price of oil is not off the table in the near term, said Tim Pickering, the fund's chief investment officer. The price of oil is low on an inflation-adjusted basis. Volatility is likely to remain high. London and Malta-based Andurand Capital Management has also had a great year, with one of its two funds rising 83% this year after a huge 20% bounce in September, Reuters reported on Oct. 5.
Does the current investor position leave room for oil to run higher, analysts said? Managed funds have a net long position of more than 327,000 U.S. crude contracts on the NYMEX, according to the Commodity Futures Trading Commission (British).
That's still well short of this summer's level of bullishness, according to RBC Capital Markets data, leaving room for more investors to stake out longer positions.
I definitely believe we are going to get double digits, said David D. Tawil, co-founder of the London-based event-driven hedge fund Maglan Capital and interim CEO of Centaurus Energy.
Tawil, who declined to provide his performance data, said the rally will be driven by new coronavirus restrictions, rising inflation and increased winter demand.