Taylor Woods Fund Gains 8% in October, Now Up 5% Year-to-Date
Some nimble energy investors are making money off the steep slide in oil prices, dodging the hit that financial markets and oil producers have suffered.
Hedge-fund managers including the team of George “Beau” Taylor and Trevor Woods, and Pierre Andurand are among those who have reaped profits during the selloff by correctly predicting that rising global crude-oil output would overwhelm the market and send prices lower. They placed bets, known as “shorts,” that prices in the futures market would fall, and were guided by research that closely tracked the flow of physical oil from wells and pipelines to storage tanks and refineries.
These oil bears came around to the view that prices north of $100 a barrel couldn’t be supported by tepid global demand growth when production was accelerating in Libya, Iraq and the U.S. Few oil-market strategists and traders predicted that oil prices, now down about 27% from a June peak, would fall at such a rapid pace at a time of steady, if slow, global growth. Many of these funds hung on their bets in the first half of the year, when they were in the red as oil prices were rising.
Success at these smaller and more specialized funds comes as so-called macro-investors, who try to predict global economic trends, have nursed losses on wrong-way oil bets this year.
Big-name fund managers are taking note. Hedge-fund titan Paul Singer expects oil prices to fall lower for several years more, thanks to strong U.S. supply, according to an investor letter.
“A lot of people who trade crude have a bullish bias,” said Ernest Scalamandre, managing member of AC Investment Management, which invests in several hedge funds. No big macro fund “really caught the big short move.”
But few took as concentrated a wager as Taylor Woods Capital Management LLC, the $932 million hedge-fund firm run by Messrs. Taylor and Woods and backed by Blackstone Group LP. As crude plunged, Taylor Woods’ fund soared 8% in October, erasing its annual loss. It is now up about 5% for the year, according to people familiar with the results....MORE
