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Reuters Dubai - The outlook for investments in the oil and gas industry remains healthy as demand growth from emerging economies is expected to recover, a co-manager of a shariah compliant oil and gas hedge fund said.
"There is constant demand for these finite resources from emerging economies like China and India, even though there is some downturn in the short term," said Russell J. Lucas of U.S.-based Lucas Capital Management, co-portfolio manager of Al Safi’s Lucas Energy Fund.
"You have to eat, you have to drive, you need heat to keep your family warm, I believe those are the things that should be the core of a portfolio, especially in uncertain times."
The Dubai oil and gas hedge fund could grow to $500 million (332.7 million pounds), from its initial investment of $50 million in the next 18 months, he said.
Times Online - Several hedge funds face big financial losses after wrongly predicting that oil and gas prices would rise as a result of Hurricane Gustav slamming into the Gulf coast of the US earlier this week.
As Gustav swept towards New Orleans on Monday, catastrophe experts were predicting insured losses of up to $7 billion (£3.9 billion) as offshore oil rigs faced destruction and the storm threatened energy supplies.
Commodities hedge funds saw the glum prediction as an opportunity, betting heavily, using the futures market, that prices would surge in the wake of the hurricane chaos.
In New York, crude oil leapt to $116 a barrel in the hours before Gustav hit the US coastline. On Nymex, natural gas futures rose 45.3 cents to $8.278 per 1,000 cubic feet. However, the experts, and the hedge funds, were caught out. By the time the storm was sending water lapping over New Orleans’s flood barriers, Gustav had been downgraded by the National Hurricane Centre to a Category 1 event. Oil eased to $105.46, with dealers soon speculating that it would fall to $100.
Bloomberg - Eurasia Capital Management plans to increase the world’s first Mongolia-focused fund fivefold to $100 million to tap economic growth fueled by the nation’s mining industry.
Eurasia’s hedge funds, which have about $200 million of investments across Central Asia, also expect to sell shares on London’s Alternative Investment Market or Deutsche Boerse AG by next June, said Alisher Djumanov, managing partner of the Singapore-based firm. Proceeds would be used to start private- equity and property funds, and expand in Central Asia, he said.
Mining in Mongolia, which has reserves of coal, copper, gold and uranium, will spur "double-digit” economic growth rates over the next 10 years as commodity prices remain high, Djumanov said in an interview. Mining accounted for about two- thirds of Mongolia’s exports last year, and foreign direct investment in the country rose more than 33 percent.
"The spillover effect from the mining sector will be significant,” Djumanov, 35, said. "We’re investing in companies that are expected to grow significantly on the back of this strong economic growth.”
Eurasia’s Mongolia Discovery Fund rose 12 percent this year, compared with the 16 percent drop in the MSCI World Index. The fund invests in coal mines, water utility as well as oil and gas companies, Djumanov said.
Times Online - The fashionable investment tactic of the past month - buying bank stocks while selling energy companies - could already have gone too far, Merrill Lynch, the financial management group, warned clients yesterday.
In mid-July, hedge funds, pension funds and other institutional investors dramatically reversed their enthusiasm for energy stocks and loathing for financials in an abrupt about-turn that sent bank shares soaring and oil and gas companies sinking.
But Merrill said yesterday that the unwinding of the classic bet of the credit crunch may already have been overdone, giving warning that banks across Europe could still be forced to raise between $70 billion (£37 billion) and $120 billion in new equity on top of the $120 billion already raised. Barclays and HBOS looked most vulnerable among UK banks to having to go back to their shareholders for more equity on top of the £4.5 billion and £4 billion, respectively, already raised.
Times Online- Hedge fund RAB Capital, one of the largest shareholders in Northern Rock when the bank was nationalised in February, this morning announced that its first half pre-tax profit had almost halved and assets under management had shrunk by more than $1 billion in six months.
RAB’s $1.4 billion Special Situations Fund, managed by its chief executive Philip Richards and among the best performers for some years, plunged 23.1 per cent.
The fund had an 8.18 per cent holding in Northern Rock and major positions in African Minerals, a London-based diamond miner, and Falklands Oil and Gas.
The news comes as many of the world’s activist hedge funds are suffering this year, with some posting losses of more than 20 per cent of their funds.
Seattle Times- The House on Wednesday approved a plan to protect more than 20 million families from an expensive levy called the alternative minimum tax (AMT) while raising taxes on hedge-fund managers and oil companies. But the measure has little hope of Senate passage, Senate leaders said.
The House voted 233-189 to prevent the AMT from expanding next April to ensnare millions of middle-class taxpayers, adding thousands of dollars to their tax bills.
To replace the lost revenue, more than $61.5 billion, the House agreed to more than double the tax rate on income from investment-services partnerships such as hedge funds, to deny oil and gas companies a lucrative deduction for domestic production, and to require credit-card companies to report their transactions with retailers to the Internal Revenue Service, among other provisions.