Hedge funds are doubling down on commodities bets with some notching big gains

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Hedge funds have ramped up their commodity bets as costs surged throughout geopolitical turmoil, and managers with big publicity are reaping sizable earnings.

The power sector noticed probably the most internet shopping for from hedge funds final month in comparison with different teams of shares, in accordance with Morgan Stanley prime brokerage information. The mixture of the shopping for and power's outperformance resulted in internet publicity reaching a two-year excessive for the hedge fund neighborhood, the information stated.

Commodities have been a transparent winner on Wall Street this yr as international demand and the warfare in Ukraine strained provide. WTI crude oil topped $130 per barrel briefly final week — a 13-year excessive — throughout escalated geopolitical tensions. On the again of surging oil, the S&P 500 power sector has rallied 30% this yr, far outpacing the broader market.

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Other commodities costs have additionally shot up amid the disruption. Aluminum not too long ago reached report highs, whereas wheat futures hit multiyear peaks amid a provide crunch. Nickel costs greater than doubled in a matter of hours on March 8, climbing above $100,000 a metric ton amid a large quick squeeze. Heating Oil futures have surged greater than 30% this yr.

Contrarian value-focused hedge fund Equinox Partners, which is concentrated on treasured metals miners and exploration & manufacturing corporations, has returned over 14% yr up to now, in accordance with an individual acquainted with the agency's returns.

"They are good inflation hedges and good geopolitical hedges," stated Sean Fieler at chief funding officer at Equinox Partners. "There is a longer term story. Metals are the energy of the future, and I think it's going to take the market some time to get its head around that."

Meanwhile, Soroban Capital made at the very least a number of hundred million {dollars} from its commodity bets since February, the Wall Street Journal reported. Soroban didn't reply to CNBC's request for remark.

Other notable buyers are additionally doubling down on the power sector.

Warren Buffett's Berkshire Hathaway continued to scoop up shares of Occidental Petroleum this week, bringing its whole stake within the oil large to over $7 billion after the latest shopping for spree.

Billionaire investor Leon Cooperman stated earlier this week power shares are low-cost relative to commodity costs. He stated his two favorites are Canadian corporations Tourmaline Oil and Paramount Resources.

primarily based on web site supplies www.cnbc.com

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