Silver as an investment

“Oil God” Andy Hall Blows Up, Closes Main Astenbeck Hedge Fund

Back in December 2014, the start of the worst oil rout since the financial crisis claimed its first victim when 113 year old Phibro, then owned by Occidental Petroleum after its sale by Citigroup, would liquidate in the US after it failed to buy a buyer. Phibro, of course, was made famous or perhaps infamous (after his $100 million Citi bonus in 2008 prompted a Congressional inquiry) by its star employee, “oil god” Andy Hall. Yet while said god’s employer Phibro, was liquidating and thus ending one of Hall’s paychecks, Hall would continue managing his $3 billion hedge fund Astenbeck (of which Occidental owns 20%) where he worked in parallel.

At the time we wondered how long this oil permabull – who suffered tremendous losses in the ensuing two years – would last in an environment where oil prices refused to go up, and whether he “would blow up twice on the same trade.” Turns out the answers, in reverse order, were “yes” and “about 2 and a half years”, because moments ago Bloomberg reported that Hall is shuttering his main Astenbeck hedge fund:

  • OIL TRADER ANDY HALL IS SAID TO CLOSE MAIN ASTENBECK HEDGE FUND
  • ASTENBECK MASTER COMMODITIES FUND II IS SAID TO LOSE 30% IN 1H

As Bloomberg adds Hall is closing down his main hedge fund “after large losses in the first half of the year” which amounted to almost 30% through June for his flagship Astenbeck Commodities Fund II.

Hall’s liquidation comes less than three months after another famous oil bull, Pierre Andurand, liquidated his last remaining long positions, although it was unclear if he had also shuttered his hedge fund.

Ironically, it was less than a month ago that Andy Hall finally capitulated, admitting that the “facts changed”, and warning that oil may not go up much from current prices in what was his bearish letter ever (full letter can be found here). This is what Hall concluded in his latest letter to investors:

Whereas it once seemed positions could be held with an eye to a longer-term secular appreciation, that is no longer the case. Indeed, the evidence is now in plain sight. Over the past year, the front month WTI futures contract has moved by double digits in percentage terms 10 times within a $40 – $55 band. This volatility has been accentuated by large financial flows into and out of the market by non-traditional investors and algorithmic trading systems. Attempting to capture just a percentage of those moves makes more sense than trying to ride what has turned out to be a non-existent trend, especially when contango inflicts a negative roll return on investors. The extreme volatility within a rangebound environment also argues for a more tactical and conservative approach to portfolio management.

Upon reading this, and seeing little further upside from their former “oil god”, it appears that Hall’s LPs decided they had had enough, and pulled their cash.

Oil, sending imminent liquidation, is down on the news.