Crude Collapse Hands Payday to Oil Trader Pierre Andurand

 Crude Collapse Hands Payday to Oil Trader Pierre Andurand

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Pierre Andurand’s flagship fund returned 69% for the year as a whole, according to a person familiar with the matter.

Pierre Andurand’s flagship fund returned 69% for the year as a whole, according to a person familiar with the matter.

Photo: Frantzesco Kangaris for the Wall Street Journal

The collapse in oil prices triggered by the coronavirus pandemic handed a big payday to

Pierre Andurand,
one of the few hedge-fund managers to have survived years of disappointing returns in commodity markets.

Best known for bullish wagers on crude that led to banner returns during the oil-price boom ending in 2008, Mr. Andurand began to bet against oil when parts of China closed to contain Covid-19 in early 2020. The virus soon hammered demand for oil and other fuels globally, prompting a market rout. U.S. crude futures eventually tumbled below $0 a barrel for the first time in history.

The wager propelled Mr. Andurand’s flagship fund, part of London-based investment firm Andurand Capital Management LLP, to return 69% for the year as a whole, according to a person familiar with the matter. That snapped two years of losses for the fund, which was burned when oil prices dropped in late 2018. The gains in 2020 marked its biggest advance since its inception in 2013.

A second fund that gives Mr. Andurand more leeway to take risk gained 154%, the person familiar with the matter said. That placed it among the best-performing hedge funds globally in 2020, according to a weekly report on fund performance by
HSBC Holdings
PLC.

Mr. Andurand is one of the most prominent survivors of a troubled decade for hedge funds that specialize in raw materials like oil, coffee and cocoa. Hampered by choppy and often falling markets, firms including Astenbeck Capital Management, Armajaro Asset Management and Brevan Howard have all closed commodities funds.

For traders who lasted the course, gyrations in the price of oil, metals and agricultural commodities sparked by the pandemic provided a chance to make up lost ground. After sinking in the spring, U.S. crude-oil prices recovered somewhat and on Tuesday rose above $50 a barrel for the first time since February last year.

Copper prices have also surged to their highest level in more than seven years, fueled by the rebound in China’s economy. A slide in government-bond yields and the scramble to safe-haven assets sent gold prices to their highest level on record in the summer, before the precious metal fell back.

Doug King’s
$170 million Cayman Islands-based Merchant Commodity Fund, up around 20% for 2020, was another to cash in on the crash in oil. Early last year, Mr. King bet that oil prices would slide and that the price of gasoline would fall relative to that of crude. This gap in prices, known as the crack spread, sank to historic lows when lockdowns kept cars off the road.

“It was hugely unprecedented and will never be repeated, I would argue,” Mr. King said of negative oil prices in a December interview.

Switzerland-based GZC Investment Management AG returned around 20%, according to a person familiar with the matter, benefiting from bearish options-based trades that profited when U.S. crude futures turned negative. A fund run by Delbrook Capital Advisors Inc., which invests in mining and energy stocks, more than doubled for the year as a whole, said Canada-based managing director

Matthew Zabloski.

Hedge funds weren’t the only ones to make money. Physical trading companies that shift raw materials around the world also benefited from the oil-market mayhem. Trafigura Group Pte. Ltd., one of the biggest independent traders, posted a record profit for the fiscal year ended in September.

Some money managers are hopeful that commodities will attract renewed interest from pension funds and other institutional investors looking for alternatives to pricey stocks and bonds.

Write to Joe Wallace at Joe.Wallace@wsj.com