NEW YORK/HOUSTON (Reuters) – Energy fund managers took heavy losses last year with wrong-way bets on the prices of oil and natural gas, leading to a wave of closures in the volatile fund sector.
The number of active energy-focused funds fell to just 738 in 2018 through September from about 836 in 2016, according to the latest available data from hedge funds industry tracker Eurekahedge. That’s the lowest number of active funds since 2010.
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The number of funds solely focused on oil or gas has tumbled to 179 in 2018 from 194 in 2016. Funds that have suspended operations included high-profile names such as Jamison Capital’s macro fund, T. Boone Pickens’ BP Capital and Andy Hall’s main hedge fund at Astenbeck Capital Management, along with smaller niche funds such as Casement Capital.
“There is a massive decline in the number of funds, and no replacements,” said David Mooney, founder of Casement Capital. “There has been a near ‘extinction event’ in commodities hedge funds.”
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“We had about 16 large hedge funds trading natural gas in Houston a few years ago,” he said. “That number is now reduced to a small number of managers.”
Some funds saw investors pull out because they increasingly view energy as an unsafe spot for their money. Casement suspended operations after difficulties raising investor interest, two industry sources said.
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The firm was supported by Lighthouse Partners, according to a regulatory filing. Lighthouse declined to comment, and Mooney would not elaborate on the reasons for Casement’s decision to close.
“All hedge funds, including commodities, that are being scrutinized for near-term performance are coming under pressure,” said Jonathan Goldberg, founder of one of the best-known energy-focused hedge funds, BBL Commodities.
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Closures of energy-focused hedge funds have outpaced launches in the last three years, according to data from Eurekahedge.
“It becomes self-reinforcing,” Goldberg said in an interview. “If people...
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