Oil Hedge Fund Giant Hammered in Crude’s Slide
Pierre Andurand, who runs one of the last big oil-focused hedge funds, took significant losses in October as petroleum prices cratered
One of the last oil hedge funds standing has become a high-profile victim of the recent rout in crude prices.
Pierre Andurand, who earlier in 2018 predicted oil could soon hit $100 a barrel, suffered the largest-ever monthly loss of his flagship fund in October. The $1 billion Andurand Commodities Fund lost 20.9% last month, taking the fund down more than 12% for the year, according to numbers sent to investors and reviewed by The Wall Street Journal.
A spokesman for Mr. Andurand declined to comment on the performance of the fund.
The losses are due to a dramatic U-turn in oil prices since a peak in early October, as fears of oversupply engulfed the market. The Trump administration granted waivers to some buyers of Iranian crude, softening sanctions against Tehran that went into effect in November and were predicted to push prices higher.
Brent, the global benchmark, entered a bear market this month—defined as a 20% drop from a recent peak—and on Thursday, Brent was trading at $66.67 a barrel, near its lowest point since March.
Oil prices took a dramatic plunge Tuesday, with U.S. crude sliding 7.1%, its steepest fall in over three years. That led to market speculation that a large hedge fund had got into trouble, with some pointing the finger at Mr. Andurand’s fund.
“It was nothing to do with us,” Mr. Andurand told The Wall Street Journal on Wednesday. “I do not think the move is related to large funds in trouble.”
In a call with investors Tuesday, which lasted around 40 minutes, Mr. Andurand didn’t discuss performance, according to people familiar with the call. Mr. Andurand said he had believed that President Trump would go through with sanctions against Iran, but when lot of the market was exempted, he started to take off risk.
In June, Mr. Andurand, who runs his fund out of offices opposite London luxury department store Harrods, said that oil prices were in a “multiyear bull run” and could hit $100 in 2018, a level unseen since 2014. He also said that prices could hit as high as $300 a barrel in a few years, although that wasn’t his forecast.
Prices initially followed his prediction. Brent broke above $86 a barrel in early October, its highest level in four years.
However, then crude prices quickly reversed on news of the Iran waivers and U.S. oil production hitting record highs. Brent lost nearly 9% in October and continued to fall into November.
Years of choppy and often falling markets have obliterated a once-prominent group of hedge funds, collectively running billions of dollars, that bet on commodities. Among firms that have shut commodities funds are Astenbeck Capital Management, Armajaro Asset Management, Clive Capital, Centaurus Capital and Brevan Howard.
Mr. Andurand, a kickboxing devotee with a reputation for aggressive trades, made his name during the 2008 financial crisis when his previous fund, BlueGold Capital, made a staggering 209% that year, after betting against oil in the final four months of the year, as Lehman Brothers collapsed and oil lost more than half its value.
Mr. Andurand’s new fund, the Andurand Commodities Fund, has gained every year since its 2013 inception, helped by bullish bets, including buying one day after oil hit a 13-year low in 2016. That year, the fund gained 22.1%. The fund is still up around 100% since its start.