Meet the Energy Funds That Made Money While Oil Fell
The plunge in oil prices has dragged down much of the energy sector with it. Yet, some energy-focused hedge funds managed to avoid the carnage entirely.
Lansdowne Partners — one of Europe’s largest hedge funds with $22 billion — gained 14.8 percent last year in its long-short energy-focused equity fund, according to a person familiar with the matter. Some commodity trading advisers, or CTAs, posted gains of more than 25 percent in 2015.
Breaking even was an achievement last year, when the price of a barrel of oil dropped 30 percent and the Standard & Poor’s 500 Energy Sector Index lost 21 percent. Energy-focused equity funds fell 10.7 percent last year, according to eVestment’s latest hedge fund performance report. Oil has fallen about another 21 percent in 2016, trading below $30 for the first time since 2003.
Lansdowne bucked the trend with a majority of its gains from short positions, the person familiar with the matter said. Other key drivers at the $140 million fund, managed by Per Lekander, were long and short bets on utilities, energy infrastructure and renewables, the person said. Lansdowne spokesman Matthew Goodman declined to comment.
Brenham Capital Management, a Dallas, Texas-based long-short equity hedge fund run by John Labanowski, gained 23.2 percent last year, according to an investor letter obtained by Bloomberg. The $824 million fund focuses on small- and mid-cap energy stocks. Dawn Blankenship, Brenham’s director of investor relations, declined to comment.
The energy sector had a few strong performers despite the overall turmoil. Parsley Energy, an Austin, Texas-based exploration and production firm, rose 15.6 percent in 2015. Bets on the stock helped Zimmer Partners, the $1.9 billion hedge fund firm, post a gain last year, according to a person familiar with the matter. Its fund, which makes long and short bets on U.S.-based energy companies was up 3.5 percent,
according to an investor letter obtained by Bloomberg. Melanie Ashmore, Zimmer’s head of investor relations, declined to comment.
Refinery stocks were a relative bright spot over the past year, though they were hit hard recently by the U.S.’s lifting of the crude export ban. Many investors have said the end of the ban will eat away at U.S. refiner’s access to cheaper oil. The McGinnis MLP and Energy Fund, which was long on refinery stocks, ended the year up 1.4 percent after a 10.4 percent plunge in December wiped out most of the year’s gains, according to someone familiar with the returns.
Steve Henderlite, chief operating officer at Mission Advisors, the San Antonio, Texas-based energy-focused hedge fund that runs the McGinnis fund, is still bullish on refineries.
“We don’t think the removal of the ban has significantly changed the story for refiners,” Henderlite said, declining to comment on the returns. Even without a ban, refiners will benefit from cheaper oil from Canada and Mexico, he said.