By Christian Berthelsen
Hedge fund Astenbeck Capital Management LLC, run by oil trader
Andrew Hall, has cut back on its bets and is holding a larger share
of its portfolio in cash amid falling oil prices.
The $3.3 billion fund firm, which is known for placing large and
long-term wagers on rising oil prices, posted a 0.8% return in
August after losing 6.9% in July, according to an investor letter
reviewed by The Wall Street Journal. Year to date, Astenbeck has
notched gains of 13% compared with average commodity-hedge-fund
returns of 3.4%, according to consultancy HFR Inc.
In a Sept. 2 letter to clients, Mr. Hall said the firm didn't
hold near-term delivery contracts for U.S. and Brent crude.
Astenbeck's biggest wager is a bullish bet on U.S. oil futures for
delivery in 2017 and beyond, and the firm also had positions in
2016 and 2017 natural gas, Mr. Hall wrote. The firm has also
reduced holdings in platinum-group metals and is wagering on a fall
in gold prices, as well as a bullish bet on the U.S. dollar, he
added.
Mr. Hall said he remains bullish on oil prices in the long term
but noted booming U.S. production has swamped global demand and put
a lid on the market, even as geopolitical crises are flaring
throughout the oil-rich Middle East and Eastern Europe. Brent crude
oil fell below $100 a barrel in intraday trading on Monday for the
first time since June 2013. U.S. oil prices have also slid this
year. Crude-oil futures prices on the New York Mercantile Exchange
were down 5.9% year-to-date through Monday.
"We have significantly reduced our market exposure, booked
profits and amassed dry powder," Mr. Hall wrote in the letter. A
firm representative had no immediate comment.
Mr. Hall's firm is at a crossroads. Occidental Petroleum Corp.,
which owns 20% of Astenbeck, has announced it is exiting
proprietary oil trading and selling its stake in Astenbeck and
Phibro Trading LLC, a sister firm that it owns outright. Mr. Hall
is chief executive of both firms, and many executives have dual
roles at both. Mr. Hall and other executives at Astenbeck and
Phibro had been reaching out to potential buyers or investors over
the summer, according to people familiar with the matter.
The letter said the firm has halved the amount of risk it is
taking since June, as measured by a metric called Value-at-Risk,
and has reduced leverage from nearly two times assets to just over
one.
Mr. Hall raised the prospect of deploying more money across
markets in the future.
"Although we have reduced our exposure in order to book some
profits, we look forward to adding back to our position on any
significant pullbacks, " he said in the letter without specifying
which assets he was referring to.
Mr. Hall correctly predicted the bull market in oil and other
commodities during the 2000s and generated huge profits for
Citigroup Inc., then the parent of Phibro. Citi agreed to sell
Phibro to Occidental in 2009 after controversy erupted over Mr.
Hall's compensation. According to the terms of a contract,
Citigroup had guaranteed Mr. Hall $100 million in 2009, but
Treasury officials balked at the hefty payday because the bank was
a recipient of a taxpayer-funded bailout following the financial
crisis.
Write to Christian Berthelsen at
christian.berthelsen@wsj.com
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