Like most oil-focused hedge funds, the Andurand Commodities Fund produced an impressive return for its investors during 2016. According to the fund’s fourth quarter and full-year letter to investors, a copy of which has been reviewed by ValueWalk, the $1.6 billion fund gained 22.1% net over the year thanks to the portfolio’s long crude exposure, which was comprised of long Brent and WTI futures and call options, after a 6.8% return in December. The hedge fund has now returned 110% since inception (February 2013) while the S7P GSCI Crude Total Return Index is down 66% over the same period.

Andurand still bullish

Heading into 2017 the commodities fund is expecting more gains from oil prices. In the letter, Andurand writes, “we expect oil prices to reach $70/bbl and the market to move into backwardation by mid-year with excess inventory is quickly evaporating.” The letter goes on, “a backwardated curve will disincentive overzealous US shale producers and will reduce selling pressure on flat price. Oil futures buying as a result of inventory hedges being unwound will also prop up oil prices.” And upward price pressure could ultimately drive prices to $80/bbl, “we believe the move to backwardation will attract large inflows from passive investors and consumers looking to capture the roll yield. Today’s record speculative length is not a concern to us as such inflows could be responsible for the next leg higher towards $80/bbl.”


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