WEST PALM BEACH, FL (HEDGECO.NET) – Hedge fund managers that placed bets on oil, made significant gains as the oil priced soared. Some hedge funds using the global macro strategy, and managedfutures, gained from their investments in long positions in oil related derivatives. According to published reports, there is a significant jump in oil derivatives positions in the New York MetalExchange [Nymex] where these derivatives are traded.
Duncan Brown, of Winton Capital, the London-based managed futures fund, quoted in the Financial Times said, “Oil has been much more difficult to trade over the past eight months than one would have thought; from whatever time perspective you were trading – on a long or short-term basis – you are getting whipped about quite a bit. However, overall this month it has been our savior. We have made a lot of money because we have been long. Our long-term risk exposure in the energy market is around 10 per cent of a $700m portfolio, but as a result of its recent upward trend, a higher weighting has been given to the sector.”
Some market observers think the rise in oil contracts was related to significant buy positions entered into by hedge funds, however hedge fund industry watch dog groups and analysts think these charges were not necessarily correct. According to such views, oil prices are mostly influenced by participants and actors in the underlying markets, and to a lesser degree by speculative activities of hedge funds and other investors in the derivative markets.
Hedge Funds have always been blamed when something goes wrong with the markets. [See Hedgeco.net Editorial]. Hedge funds have succeeded partly because of their ability to shift exposures on a timely basis. This strategy has enabled hedge fund managers to take advantage of unfolding opportunities, by investing in these situations. When their analysis fails to carry through, losses are encountered. Market forces, and supply and demand of commodities have all played roles in commodity price surges..
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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