Pierre Andurand posts blockbuster gains after bet on rising oil prices

Pierre Andurand is among a group of hedge fund managers who have notched up sharp gains in recent weeks as fears of global supply disruptions sent commodity prices soaring to the highest level in 14 years.

Andurand’s Discretionary Enhanced hedge fund has posted gains of around 109 per cent in the year to early March after betting that crude oil prices would rise, according to people familiar with the fund’s performance. Other funds, including Kenneth Tropin’s Graham Capital and Paris-based CFM, have also profited from big moves in energy prices.

The gains by Andurand, who manages around $ 1.1bn, come during a frenetic year in commodities markets. Oil prices have soared by about 50 per cent since the end of 2021, while a broad basket of raw materials tracked by the S&P GSCI index has been up by a third to its highest level since 2008. The gains accelerated sharply in recent weeks after Russia invaded Ukraine and the west hit Moscow by imposing unprecedented sanctions. Russia is a major supplier of oil, gas and – along with Ukraine – grains such as wheat.

“Investors who are long commodities – whether by luck or skill – have had a great year packed into a few weeks,” said Andrew Beer, managing member at Dynamic Beta Investments. The DBMF fund that he co-manages is up by around 11 per cent so far this year, with crude oil being by far the biggest contributor to gains.

Andurand’s profits mark the latest correct call for the former BlueGold trader, who also chalked up large returns in 2020 when he predicted oil prices could turn negative. Andurand Capital declined to comment on performance this year.

Line chart of Brent ($ / barrel) showing crude oil prices soar

Betting on higher oil and gas prices has also been a popular trade in recent months among computer-driven hedge funds. Many of these use algorithms to detect and then latch on to develop price trends in global financial markets.

Energy prices had already started rising as global economies rebounded from coronavirus-induced lockdowns, prompting a number of hedge funds to take bullish positions even before Russian President Vladimir Putin launched a full-scale invasion of Ukraine on February 24. A model portfolio run by Société Générale, which tracks the positions such funds may take, has been running bets on rising crude and heating oil for more than two months.

Funds tracking other trading signals, for instance the supply of oil or differentials in the price of crude for delivery now or well into the future, were also largely betting on higher prices.

“The signals were very, very bullish[even before the Russian conflict]. . . you had almost every factor contributing ”to a bullish signal for energy positioning, said Pablo Calderini, president and chief investment officer at Connecticut-based Graham Capital, which manages around $ 15bn in assets.

He pointed to the reopening of economies after the pandemic and the fact that oil prices for delivery in the near future were higher than prices further out, which is traditionally a sign that oil prices will strengthen.

On February 23, the day before the invasion of Ukraine, quantitative funds wagering on market trends were running “very high” bets on rising commodity prices after increasing their positions earlier in the month, said Cedric Vuignier, head of liquid alternative managed funds and research at SYZ Capital.

Graham’s Tactical Trend fund was up 11.4 per cent in the first two months of the year, according to a letter to investors, driven by moves in commodities, while its Quant Macro fund was up 4.7 per cent.

Other funds to profit this year include CFM, which manages $ 8.5bn in assets. Its Discus fund, which uses a range of market signals, is up 15 per cent in 2022, with a large portion of gains coming from energy prices, said a person familiar with its positioning.

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London-based Aspect Capital, which manages more than $ 9bn in assets, has gained 8.6 per cent in its main Diversified fund this year. Its biggest bet on rising prices was in the energy space, according to an investor letter seen by the Financial Times, and it profited from gains in the price of oil and related products. Leda Braga’s Systematica, meanwhile, has added 11 per cent in its BlueTrend fund this year, helped by positions in commodities.

Funds have also profited from rising energy prices by trading other types of assets. Makuria Investment Management, headed by Mans Larsson, the former head of Canyon Capital’s London office, gained nearly 12 per cent last month, according to an investor letter. That was helped by positions in companies involved in the transition to green energy and the supply of metals such as copper, a key metal in improving energy efficiency and reducing carbon emissions.

“We are in the early stages of a long-duration structural bull market in energy commodities and ‘green metals’ that will probably last for decades,” Larsson wrote in the letter.


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