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How Pierre Andurand became oil’s comeback kid

The French hedge fund manager was losing confidence and clients before a bet on an oil shock came good

Pierre Andurand was starting to doubt himself.

In January, the French hedge fund manager had hoped a bet on diesel would be another blockbuster, the kind of trade that first made his name last decade, when he quickly climbed the ranks at Goldman Sachs and then at oil trader Vitol before launching his own fund at the age of 30.

Instead, the trade went sour, capping a miserable 24 months, where Mr Andurand lost money in consecutive years. The once-$1.6bn Andurand Capital Fund was shrinking as even long-term investors grew nervous, leaving him at one of the lowest points in a 20-year career. 

“It’s so easy to lose confidence and I have lost confidence many times, to be honest,” Mr Andurand said. “I was wondering if we’d ever get the opportunity to make money again. But the key in this industry is to be resilient.” 

What followed was a remarkable bounceback. The two funds managed by Mr Andurand, with $800m divided into two pools that take on different levels of risk, have soared by 148 per cent and 68 per cent year-to-date, after he spotted early in the year that the coronavirus outbreak in China had the potential to upend oil markets.

A series of large-scale futures and options bets Mr Andurand made against the oil price in early February have landed deep in the money, cementing his reputation as a trader who performs best when markets are at their most volatile, successfully profiting from almost every large oil price swing of the last 17 years.

He predicted in February, when oil was still close to $55 a barrel, that prices would turn negative. The US crude benchmark, West Texas Intermediate, sank briefly to -$40 a barrel in April in one of the wildest days in the market’s history, as the demand-crushing pandemic left traders paying rivals to haul their barrels away. Now 43 years old, some in the industry have dubbed him the “Comeback Kid”.

“Even my team thought I was crazy when I told them oil prices could go negative,” Mr Andurand says. “But everything I had studied on this virus convinced me that the world was in trouble.”

The attributes of a hotshot trader

In his career Mr Andurand has often been portrayed as the quintessential hotshot young trader. It is not hard to see why: a former junior swimming champion, a sideline in kick-boxing promotion, a Bugati supercar, a Knightsbridge townhouse, a marriage to a Russian model and a wedding featuring a performance from Elton John.

All of it added up to an image of someone living the jock-bro dream, attracting sneering comments from those who saw him as a lucky punter who would one day get caught out. Real oil traders move cargoes of oil, the argument goes, not just paper contracts.

This flash caricature, if it ever had much truth to it, seems increasingly hard to sustain as Mr Andurand approaches middle age. Three years ago he decamped from London to Malta. He has divorced, remarried last year, and thrown himself into studying, undertaking three masters degrees, including one at Oxford university in theoretical physics.

He has always been teetotal, having grown up in an alcohol-free household raised by two civil servant parents. He still trains most days, but there is an air of vulnerability when he concedes a common foible in ageing athletes.

“I realise sometimes I need to be kind to myself,” Mr Andurand said. “But when there's too much going on for me, my weakness is I eat too much and I put on weight.”

It is not exactly the mantra of the archetypal work-hard-party-harder oil trader. His frameless glasses and thoughtful demeanour instead give the impression of an academic poker player, who will only go big on his hand once he has analysed the odds. 

“If you look at my track record, it’s a few big trades,” he said. “I’m not a hyperactive deal junkie. I can go weeks without making a trade.”

These big trades include a monster bet against jet fuel ahead of the second Gulf war, which first made his name in the tight-knit oil trading community. From 2003 he made huge returns at Vitol betting China’s rise would send oil prices soaring, at times earning multiples of what some of the trading house’s traditional dealers were making shuffling physical cargoes.

When he started his first fund, BlueGold, Mr Andurand correctly called oil’s ascent towards a record $147 a barrel in 2008, its subsequent crash in the financial crisis, and its eventual recovery into the $100 oil era. BlueGold closed after a losing year in 2011, but was still up roughly 240 per cent from inception. Many BlueGold investors stuck with him when Andurand Capital Management launched in 2013, being rewarded when he correctly called the end of $100 oil the following year. One million dollars invested in BlueGold in 2008 and carried through to the present day fund would now be worth $10m-$14m, after fees — most of that from calling a few big moves right.

“I've always been more of a big picture guy,” Mr Andurand said.

He left Vitol to become a hedge fund manager as he saw little difference between managing $2bn for someone else or $200m for his own clients.

“Maybe I’m a psychopath,” he said, laughing, “but the amount of money did not faze me, even at a young age.”

If there is a philosophy to his trading style, it is rooted in the applied mathematics he studied as an undergraduate and the probabilities embedded in the options market. He and former colleagues say the fund’s aim is to have a “large right tail”: they may lose small amounts on bets they get wrong but win big when they hit the target.

But in 2018 and 2019 the wheels started to come off. First, Mr Andurand lost 20 per cent betting on higher prices when US President Donald Trump soft-pedalled sanctions on Iran’s oil exports. In 2019, oil prices were relatively stable and the fund slipped to a small loss, followed by the wrong-way diesel bet in January.

But while Mr Andurand’s confidence wobbled, his attention was already shifting to China, where the coronavirus outbreak had brought a lockdown in Wuhan.

“Honestly, I was obsessed. I was spending 10 hours a day reading everything I could find on coronavirus, doing my own modelling and trying to forecast what governments would have to do,” he said.

“The consensus view was it was only going to be a China problem. But I was looking at it saying ‘it’s going to spread to the rest of the world, there are going to be more lockdowns. And when it does oil demand will crash.’”

The fund loaded up on put options, which rise in value as prices fall. It took short positions in both Brent and WTI crude futures too, including spread trades betting oil contracts for immediate delivery would weaken fastest.

“And then we waited,” he said.

His main office in Knightsbridge, directly opposite Harrods, was largely closed more than a month before the UK lockdown started, with Mr Andurand fearing that the brewing pandemic posed a risk to his team.

In March, as lockdowns spread across Europe and North America, oil demand started to dive. Crude went into freefall, with an ill-timed price war between Saudi Arabia and Russia exacerbating the situation. Investors asked if he should take profits.

“I had to tell them this is just the preview,” Mr Andurand said.

There were some hairy moments. The fund went ahead with its party at London’s International Petroleum Week in late February. Mr Andurand also attended a Vitol event with 200 traders earlier that month, perhaps against his better judgment.

“I thought for sure I’m going to catch it,” Mr Andurand says ruefully. “But you could see there how bullish everyone still was.”

One of his team did fall ill. Cameron Van Der Burgh, a South African Olympic swimming champion, revealed on Twitter in March that he had been flattened by the virus. 

Donald Trump also sparked a violent rebound in US crude prices in early April, after talking up a deal between Saudi Arabia and Russia to cut oil production.

“Trump has cost us a lot of money,” Mr Andurand said. But the eventual Trump-backed deal that emerged failed to end the rout.

The crash climaxed on April 20. US crude started the day near $18 a barrel, but plunged as traders realised there was little available space in the tank farms at the contract’s delivery point.

By the afternoon, prices were in single digits. In the final hour of trading, the last bulls capitulated. Prices turned negative as desperate traders were forced to pay rivals to take barrels away. Within minutes prices crashed to -$40, sowing fear throughout the oil industry.

Negative prices should have been Mr Andurand’s crowning moment. But the man who had called it two months earlier sat out the denouement. He had taken profits that day shortly before prices slipped below zero. 

“I regret it a little,” he said. “‘Damn, I’m not participating in it’ I thought as we watched it go under. But the easy money had been made already.”

It is uncomfortable to make money from a pandemic that kills hundreds of thousands of people, Mr Andurand acknowledged, even though oil traders are used to betting on wars and crises.

He has faced criticism from some within the industry for publicising his views on Twitter, but insists he has no need to “talk his book” as a trader with a longer-term view. He says his concern about the virus is very real.

“The lockdowns might be easing now, but I don’t particularly want to go out or see people,” Mr Andurand said. “We still know little of the long-term effects. The fund is not short any more, but I still get upset when I see people comparing it to the flu.” The fund opened a small long position in mid-May as oil prices recovered.

His anger towards those who tried to dismiss the danger is palpable.

“One person that we found really disgusting was Elon Musk,” says Mr Andurand, adding that he had once viewed the Tesla chief executive as “a bit of a superhero” before he downplayed the impact of the virus.

It is not quite clear what Mr Andurand does next. When he was 19, he abandoned his dream of being an Olympic swimming champion. But he had so many ideas for his future that he settled first on making money to fund what came next.

Mr Andurand says his interests today are climate change and the risk of future pandemics. He supports increasing taxes on the wealthiest to help rebuild the economy. Starting a fund that invests in renewable energy is under consideration. He is looking at algorithmic programmes to support his own oil trading in quieter markets. He is exploring backing pandemic research.

The confidence would appear to be back.

When he remarried last year, he held a large celebration in St Tropez. Asked whether Elton John was booked to perform again, he grinned.

“No, not this time. We had Gloria Gaynor instead,” he said. “She sang ‘I Will Survive’ of course. I guess we didn’t realise how apt the song would become during the pandemic.

“It’s a song about resilience,” Mr Andurand said. “I’ve always admired that.”