Pierre Andurand posts blockbuster gains after bet on rising oil prices

Pierre Andurand is amongst a bunch of hedge fund managers who’ve notched up sharp positive aspects in current weeks as fears of worldwide provide disruptions despatched commodity costs hovering to the very best stage in 14 years.

Andurand’s Discretionary Enhanced hedge fund has posted positive aspects of round 109 per cent within the yr to early March after betting that crude oil costs would rise, based on individuals accustomed to the fund’s efficiency. Different funds, together with Kenneth Tropin’s Graham Capital and Paris-based CFM, have additionally profited from large strikes in power costs.

The positive aspects by Andurand, who manages round $1.1bn, come throughout a frenetic yr in commodities markets. Oil costs have soared by about 50 per cent because the finish of 2021, whereas a broad basket of uncooked supplies tracked by the S&P GSCI index is up by a 3rd to its highest stage since 2008. The positive aspects accelerated sharply in current weeks after Russia invaded Ukraine and the west hit Moscow by imposing unprecedented sanctions. Russia is a significant provider of oil, gasoline and — together with Ukraine — grains similar to wheat.

“Traders who’re lengthy commodities — whether or not by luck or talent — have had an excellent yr packed into a couple of weeks,” mentioned Andrew Beer, managing member at Dynamic Beta Investments. The DBMF fund that he co-manages is up by round 11 per cent up to now this yr, with crude oil being by far the largest contributor to positive aspects.

Andurand’s income mark the most recent right name for the previous BlueGold dealer, who additionally chalked up massive returns in 2020 when he predicted oil costs might flip destructive. Andurand Capital declined to touch upon efficiency this yr.

Betting on increased oil and gasoline costs has additionally been a well-liked commerce in current months amongst computer-driven hedge funds. Many of those use algorithms to detect after which latch on to creating value developments in international monetary markets.

Power costs had already began rising as international economies rebounded from coronavirus-induced lockdowns, prompting a lot of hedge funds to take bullish positions even earlier than Russian president Vladimir Putin launched a full-scale invasion of Ukraine on February 24. A mannequin portfolio run by Société Générale, which tracks the positions such funds could take, has been working bets on rising crude and heating oil for greater than two months.

Funds monitoring different buying and selling indicators, as an illustration the provision of oil or differentials within the value of crude for supply now or nicely into the longer term, have been additionally largely betting on increased costs.

“The indicators have been very, very bullish [even before the Russian conflict] . . . you had virtually each issue contributing” to a bullish sign for power positioning, mentioned Pablo Calderini, president and chief funding officer at Connecticut-based Graham Capital, which manages round $15bn in belongings.

He pointed to the reopening of economies after the pandemic and the truth that oil costs for supply within the close to future have been increased than costs additional out, which is historically an indication that oil costs will strengthen.

On February 23, the day earlier than the invasion of Ukraine, quant funds wagering on market developments have been working “very excessive” bets on rising commodity costs after growing their positions earlier within the month, mentioned Cedric Vuignier, head of liquid various managed funds and analysis at SYZ Capital.

Graham’s Tactical Pattern fund was up 11.4 per cent within the first two months of the yr, based on a letter to traders, pushed by strikes in commodities, whereas its Quant Macro fund was up 4.7 per cent.

Different funds to revenue this yr embrace CFM, which manages $8.5bn in belongings. Its Discus fund, which makes use of a spread of market indicators, is up 15 per cent in 2022, with a big portion of positive aspects coming from power costs, mentioned an individual accustomed to its positioning.

London-based Facet Capital, which manages greater than $9bn in belongings, has gained 8.6 per cent in its predominant Diversified fund this yr. Its largest guess on rising costs was within the power house, based on an investor letter seen by the Monetary Occasions, and it profited from positive aspects within the value of oil and associated merchandise. Leda Braga’s Systematica, in the meantime, has added 11 per cent in its BlueTrend fund this yr, helped by positions in commodities.

Funds have additionally profited from rising power costs by buying and selling different forms of belongings. Makuria Funding Administration, headed by Mans Larsson, the previous head of Canyon Capital’s London workplace, gained almost 12 per cent final month, based on an investor letter. That was helped by positions in firms concerned within the transition to inexperienced power and the provision of metals similar to copper, a key metallic in enhancing power effectivity and decreasing carbon emissions.

“We’re within the early phases of a long-duration structural bull market in power commodities and ‘inexperienced metals’ that can seemingly final for many years,” wrote Larsson within the letter.

laurence.fletcher@ft.com