Pierre Andurand, one of the world’s best-known hedge fund managers, specializing in oil, made money on the historic crash of American crude this week, adding to solid gains in his two main funds this year. .
Andurand, who has been betting on crude prices since the start of the year, said he saw little respite for the oil industry until a coronavirus vaccine was discovered, which caused a sharp economic slowdown and reduced global demand for oil by up to a third.
US crude prices fell below zero for the first time on Monday, as storage tanks filled up, forcing producers to essentially pay traders to remove the barrels.
“It’s a crazy time, but it really shows what happens when we test logistical constraints such as pipelines and storage tanks in an oil-sized market,” said Andurand. “When there is not enough storage for the oil that the world still produces, then prices can go anywhere lower.”
His London fund Andurand Capital Management, which managed around $ 1 billion last year, has become one of the biggest winners of the oil crisis, boosting its reputation for identifying and making big swings in the market. Mr. Andurand became famous in 2008, betting on the rise in oil to nearly $ 150 a barrel before taking advantage of his subsequent crash.
Andurand said the coronavirus epidemic had become his main area of interest since the start of this year, when he spent two weeks studying the early spread of the disease. The fund manager – a kick-boxing enthusiast and former champion swimmer – closed his Knightsbridge office in early February, asking staff to work from home, weeks before the UK locked -out official on March 23.
“I thought many people denied the potential of a pandemic and its ripple effects,” said Mr. Andurand. “It was clear to me from February that it was going to spread to the rest of the world, that it was contagious and that the potential death toll meant that there was no other way but to have a lock. “
Its two funds have started betting against the price of oil, believing that energy would be one of the most affected sectors. The core fund, which holds approximately half of the company’s assets under management, gained more than 63% for the year, net of fees, in the first quarter, according to people familiar with the fund’s performance.
His second, more risky fund, which is now roughly the same size, increased 153% over the same period. Crude was trading near $ 70 a barrel in early January.
In the midst of the firm’s winning race, Cameron van der Burgh, the firm’s analyst and world record holder in the men’s 100-meter breaststroke, was struck by the virus. he describes the severity of his illness on Twitter as a warning to those who still argue that it would not affect young people and healthy people.
Mr. van der Burgh, who recovered on Monday published a Photoshopped image of Mr. Andurand as actor Will Smith in the post-apocalyptic film, I’m a legend, saying the fund manager told him in February that prices would turn negative. He added the hashtag #KingOfOil.
Mr. Andurand confirmed that he had bet against American crude prices on Monday, but said that he had closed the position shortly before prices became negative, deciding to take profits rather than create more risks.
The fund adopted a more cautious position in April to protect its exceptional returns in the first quarter, but also due to the risk of political intervention in the oil market. People familiar with the fund’s performance said it was on the rise this month.
A tweet from President Trump this month caused oil prices to soar, although the Opec deal that the U.S. president claimed was unsuccessful in supporting the market.
Said Mr. Andurand. “We had a good race; let’s reduce the risk a bit and wait. “
However, he does not expect the price of oil to go up any time soon.
“We are going through an economic crisis… With a very high unemployment rate that will last longer than most people expect,” said Mr. Andurand.
“Central banks can support bond and equity prices for a while, but it is much more difficult for oil because it is a real physical product.”