Oil’s Swoon On OPEC Is Rare Boon For A Few Hedge Funds

OPEC’s decision not to cut oil output despite a market glut gave a late-month boost to several energy hedge funds in November, pushing them toward double-digit gains in a year marked by commodity fund closures.

Greenwich, Connecticut-based Taylor Woods Capital Management, one of the larger U.S. energy hedge funds with nearly $1 billion under management, gained more than five per cent last month and is up over 10 per cent on the year, according to sources familiar with the firm’s returns.

The fund, run by ex-Credit Suisse traders George “Beau” Taylor and Trevor Woods, runs a diversified energy-related portfolio, but the slump in oil prices to five-year lows after the OPEC meeting was a key driver, the sources said.

Pierre Andurand, founder of the BlueGold fund that had gigantic gains during the 2008 oil market slump, made 18 per cent last month at his $350 million London-based Andurand Capital Management, which bet correctly on a dive in oil prices after the OPEC decision, the sources said. The November run extended the fund’s annual gain to around 20 per cent.

Crude oil prices have tumbled about 40 per cent since June, the slump accelerating after the Organization of the Petroleum Exporting Countries decided last month not to cut production in spite of an oversupplied market – a decision that followed weeks of furious speculation and uncertainty in the market.

“Not everyone dared to put on heavy positions because no one really was sure what OPEC was going to do,” said Tariq Zahir, managing member at Tyche Capital Advisors, a small-sized commodity trading firm in Hollow Way, New York. Tyche exited its crude oil positions prior to the meeting.

Andurand Capital could not be reached for comment. Taylor Woods declined comment.

Prior to November, Andurand Capital was up just about two per cent on the year, according to the “The Nelson Report” on hedge fund performances, compiled by futures broker Newedge.

The Nelson Report’s list of other well-known commodity funds that also trade energy and with annual gains through October includes the $1.3 billion SummerHaven Commodity Absolute Return Fund in Stamford, Connecticut, which rose seven per cent, and the $200 million Merchant Commodities Fund in Singapore, which was up 27 per cent.

Those were rare bright spots in a commodity fund industry that’s been steadily shrinking for several years.

Funds going out of business this year include Houston-based AAA Capital Management Advisors, which will shut its doors and return investor money by the year-end after lackluster returns. The fund, at its peak, managed more than $2 billion, but now has less than $540 million under management.

Brevan Howard, one of the world’s biggest hedge fund managers, is closing its $630 million commodities fund, which was down about four per cent through October, a source familiar with the matter said on Monday.