Andrew Hall's Astenbeck Capital Management Lost 16.6% in July on Oil Rout

Aug 6 2015 | 4:38pm ET

By Barani Krishnan (Reuters) - Renowned oil trader Andy Hall suffered his second-biggest monthly loss ever in July in a "brutal month" that left his hedge fund about $500 million poorer, telling investors he failed to anticipate a sudden market shift that roiled crude.

Hall's Astenbeck Capital Management in Southport, Connecticut, was the latest commodity fund to be hit by plummeting crude oil prices, following two funds closing last week.

Astenbeck posted a 17 percent loss for last month and a 15 percent decline on the year after the July selloff triggered by record pumping of oil by Middle East producers, higher U.S. crude stockpiles and China's stock market collapse.

Oil prices are currently around $40 a barrel, down from about $100 a year ago. In July alone, U.S. crude fell 21 percent, the most since the 2008 financial crisis, while Brent, the global benchmark, dropped 18 percent.

"Last month was brutal for most commodities and anyone investing in them," Hall said in a letter sent to investors and seen by Reuters on Thursday.

It was the worst month for Astenbeck since a 19 percent slide in September 2011 and eclipsed the 14 percent drop in May 2012, which Hall described as his "mensis horribilis," Latin for horrible month.

Astenbeck's total assets under management, which comprise two commodity funds, including an oil-focused one, fell to $2.8 billion from $3.3 billion in June, according to performance data that accompanied the letter.

Hall, a 64-year old former Citigroup star trader known for his $100 million bonus, pricey art collection and castle in Germany, blamed the July losses more on market perception than failed strategy.

"Even more importantly, the perception of a large and persistent crude oil glut is now endemic and has triggered a massive shift in sentiment – one that we frankly did not anticipate," he wrote in the letter.

"One reason for that is that we see fundamentals continuing to improve and believe there is something of a disconnect between perception and reality."

Hall devoted the entire seven-page letter, barring one paragraph, to his defense that oil prices should rise in the medium to longer term despite bearish forecasts by the U.S. Energy Information Administration and other key agencies.

"However, the IEA forecast is the one used by most oil analysts on Wall Street as the basis for their own forecasts. For that reason the consensus view is now extremely bearish."

Two commodity-focused fund managers, Armajaro and Cargill's Black River, shuttered their funds last month after hefty losses.

The founders of another commodity fund, Vermillion Asset Management, left the firm after an exodus of investor cash.

This week, the 19-commodity Thomson Reuters/Core Commodity CRB Index, a key sector benchmark, fell to 12-year lows after losing 15 percent this year.

In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...