New York (HedgeCo.net) – It appears as though a very popular trade heading in to 2015 isn’t working out the way some hedge fund managers thought it would. The strategy was buying the debt of energy companies after oil prices fell in the second half of 2014, with the thinking that oil would rebound and the debt that was purchased cheaply would soar in value as oil rebounded.

Unfortunately for the investors that used this theory, oil has not rebounded like they thought it would and in fact is down from where it was at the beginning of the year.

The Wall Street Journal featured an article that pointed out certain hedge funds and how the energy debt trade has hurt their performance. According to the article, Magnetar Capital LLC is down 12% on a YTD basis through the end of September, Brigade Capital Management LP’s main fund fell 7% this summer and is in negative territory as a result, and King Street Capital Management LP is in line for its first annual loss in the 20 years since inception.

Rick Pendergraft
Research Analyst
HedgeCoVest