Commodity hedge funds back in vogue after years of outflow
TORONTO (Reuters) – Commodity-focused hedge funds generated strong returns in 2021 and investors have long been wary of these funds now investing money in them, betting that the recovery from the pandemic will pay demand for oil, gas and metals raw materials to cereals to sugar and coffee.
As money has poured into other investments in commodities, hedge funds are a more surprising choice after years of exits and closings of several leading companies.
Among the funds that have recorded big gains this year are those managed by famous oil investor Pierre Andurand. Its commodities fund was 27% on the year to the end of May while its improved discretionary fund was 33%, a person familiar with the matter told Reuters on Wednesday.
We did not know which bets were the most profitable for the Andurand firm.
British company Odey Asset Management achieved 10.7% over the same period in its long-short equity fund, which bets on the commodities space. Westbeck Capital Management, also based in the UK, generated gains of 75% in the fiscal year ended June 2.
Auspice Capital, a Canadian computerized commodities-focused fund, posted returns of 17.7%, with rallies in metals, coffee and sugar contributing to performance, according to draft letter to investors seen by Reuters .
“The uptrend is intact for the commodities complex as a whole,” said Westbeck co-founder Jean-Louis Le Mee. “We believe that oil is about to burst and that the commodity complex is likely to reach new heights during this cycle.”
Commodity hedge funds returned 6.5% in April, a crushing 2.5% for the average hedge fund, according to the most recent performance data from eVestment. These funds employ a variety of strategies, betting on everything from pure commodities to stocks and corporate debt.
The gains reflect rapidly growing demand in the global economy in which many sectors were affected during the pandemic and others expect a boom related to the transition to clean energy and electric cars. Tight supplies have pushed copper and aluminum prices to multi-year highs, and copper miners say even higher prices are needed to mobilize new supplies.
About $ 492 million was paid to commodity hedge funds in the first three months of 2021, more than half of last year’s inflows, after the industry recorded a net outflow of $ 9.8 billion. dollars between 2016 and 2019, according to Hedge Fund Research.
Commodity markets are notoriously volatile, and hedge funds have more flexibility than traditional investors to deal with the roller coaster of taking both short and long positions.
Auspice, with a 70% allocation to commodities, more than doubled its assets in one year, from around C $ 200 million ($ 165 million) to $ 500 million. Tim Pickering, the fund’s chief investment officer, said commodities will remain a popular bet as investors seek insurance against inflation.
Kimura Capital, a UK-based commodities trade finance fund, has doubled its assets in 2021 and expects it to triple in size before the end of the year, said Kristofer Tremaine, founder and CEO.
While recent data from the U.S. Commodity Futures Trading Commission showed a three-week pullback in fund managers’ bullish commodity bets, hedge funds focused on everything from natural gas to crops and copper. , indicate that the positive momentum will continue.
“You can’t read too much into a data point or two,” said Troy Gayeski, partner and co-chief investment officer of US hedge fund SkyBridge Capital, which manages $ 7.5 billion.
“As you go through the holdings of pretty much every major hedge fund, you can see everyone waking up and saying commodities could have a long life here. How do you play it? “
($ 1 = $ 1.2110 Canadian dollars)
Reporting by Maiya Keidan; Editing by Denny Thomas and David Gregorio