Energy HFs Power Up In ‘07

01-09-2008 | Source: Hedge Fund Daily

Energy hedge funds took advantage of unexpected moves in oil prices to become the No. 2 performer in 2007, according to HedgeFund.net. Early results indicate that the strategy gained +3.81% in December, bringing the HFN Energy Sector Average to +17.53%, second behind the leader emerging markets, which ended the year at +20.83%. Energy funds, which capitalized on oil prices heading toward $100 a barrel despite predictions last year that they would fall and remain flat, also proved to be the second-best performer over the past five years, with the average energy HF aggregating +166.92% since 2001. That’s still only about half as good as emerging markets during that period, which saw the average energy hedge fund record an explosive +320.76%. According to HFN, distressed hedge funds experienced their worst performance since 2000, inching up +0.25% in December and finishing the year at +6.25%. HFN notes, however, that funds in that specialty can be hopeful, if history repeats itself: Bad years in distressed HFs often are followed by good ones. HFN cites the -4.53% distressed funds notched in 1998, followed by +19.83% in 1999. It happened again in 2002,when distressed funds gained barely 7%, but followed that up with +32.22% a year later. Indeed, as reported here earlier this week, hedge fund managers predict distressed hedge funds to be the top performer in 2008.