NatGas ‘Stabilization’ Sparks Massive Gains For Hedge Fund Hurt By September Surge

For at least one hedge fund, the last few months have been the worst of times and the best of times.

Amid the chaotic energy crisis erupting around the world, Miami-based Statar Capital, which manages about $2bn in assets, suffered major losses in September, as natural gas prices surged and purged.

At the time, The FT reported that the fund suffered losses of about $130 million in the first two-and-a-half weeks of September (leaving the fund down 7.7% for September) as Statar had lost money in European natural gas but made money in US natural gas this year, said one person close to the firm.

However, in a remarkable turnaround since then, The FT reports that, according to multiple people familiar with the performance, the fund, headed by Ron Ozer, a former trader at Citadel and DE Shaw, made about 23.5% last month, bagging over $400 million in profits in October.

It appears that after the chaotic moves in September, October’s relatively rangebound environment (for both NatGas prices and vols) helped support Statar’s strategy.

Source: Bloomberg

The FT reports that Statar was able to profit from market volatility, repeatedly using declines in short-term contracts as a chance to increase positions before taking profits during rebounds in price, said one person familiar with its positioning.

Source: Bloomberg

Notably, October also saw European NatGas prices retrace back towards US (chart below is oil barrel equivalents to offer some context), but recently prices have started to decouple once again…

Source: Bloomberg

This huge return in October makes Statar one of the big hedge fund winners from a volatile month for some markets, during which bonds also experienced a large upheaval. Statar was one of last year’s top-performing hedge funds, gaining 59 per cent.

As The FT notes, commodity markets have been hard going for hedge funds over the past decade, as lengthy periods of declining prices have made it harder to make money, and a number of firms, including Armajaro Asset Management and Astenbeck Capital Management, have shut funds. However, Statar has previously said that this exodus of capital had helped create “the best opportunity set for natural gas trading in many years”.

We wish Ozer well in the rest of the year but note that given Putin’s recent actions, things may be about to get significantly more exciting once again.