Pierre Andurand was sure oil prices would soar in 2023. He placed massive bets. Now, one of his funds faces an existential crisis.
From a report out this morning in Bloomberg:
Oil trader Pierre Andurand’s losses deepened this month, with his hedge fund slumping to its worst-ever phase of decline.
His main Andurand Commodities Discretionary Enhanced Fund, which makes leveraged bets, fell by another 7% this month through June 23, extending this year’s losses to about 51%, according to an investor letter seen by Bloomberg News.
Andurand buys energy options, hoping to profit on huge price swings. This year, he expected oil to surge due to China’s reopening.
Instead, the price has fallen on a tepid global economy. This resulted in huge losses for the star trader.
Commodity options are notoriously risky. A small swing in price can quickly wipe out a leveraged position.
Andurand has never taken losses this large. Despite many years of strong performance, a loss of the majority of the fund could spook investors.
The key is psychology. If people see you down by more than half, they assume you can go down all the way.
And they certainly don’t want to be there when it happens.
Hedge funds under pressure frequently see huge withdrawals. This leaves the fund hurriedly selling positions at whatever price it can get.
In such a downward spiral, the best employees leave as well.
Perhaps Pierre will make another risky bet that saves the firm. But that may only delay the day of reckoning.
The most successful investors over the long term buy great assets and hold them forever. That’s the group I want to be in.
What do you think the future holds for Andurand? Leave a comment and let us know!
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Correction: An earlier version of this article estimated Andurand’s losses at over $1 billion.
After publishing the article, I heard from a representative of Andurand. They explained that while one fund is down over 50%, Andurand manages four funds.
Since Andurand refused to disclose the size of each fund, it’s impossible to estimate the dollar losses here. So, I removed references to any specific dollar amount.
Since the fund that took the large loss is the main fund, per Bloomberg reports, I assume the loss is quite significant. But without more transparency from Andurand, we cannot know the exact size of the loss.
I always strive to bring you the most accurate, up to date information. When more information becomes available, I will let you know about it right away, as I have in the past.
More on markets:
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Carl Icahn Losing $900 Million a Day
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