Natural Resource Fund Up 27%, Manager Predicts $75 A Barrel

Jan 19 2006 | 7:41pm ET

Garrett Smith, general partner at Dallas-based hedge fund firm Spinnerhawk Capital Management, which just passed its six-month-mark with net returns of 27.5%, has seen the highs and lows of the oil industry and expects crude to settle around $75 a barrel by year-end. According to Smith, Spinnerhawk’s fund has been taking in money each month since its inception in July, and now has $40 million in assets under management.

The fund, which aims to close at $250 million, invests in two asset classes, energy futures and publicly-traded energy stocks. “We devote approximately one-third of our portfolio to futures and the other two-thirds comes from equity,” Smith said. “Typically, I describe our competitive edge as industry experience,” said Smith, who began working on oil rigs as a teenager and later spent 17 years with BP Capital, where he worked with oil tycoon Boon Pickens.

“My own estimate is that we will likely see oil trade toward $75, which is where world-wide governmental bodies came and acted to stop prices from going up during the hurricane,” said Smith, referring to Katrina, which temporarily caused oil production to ground to a halt in parts of the Gulf of Mexico. “There was a long time where oil was not attractive; it was not something that hedge funds were made from,” he said.

“But today, things have changed and the markets are considerably tighter than they have been for many decades, and it has become an area that has generated price appreciation for the underlying commodity and the stock, so there is a lot of interest in it now.”  


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