A small group of hedge funds are enjoying some of the best deals in a few years, thanks to the big fluctuations in shipping charter prices recently fueled by the clash between the Omicron coronavirus variant and the awakened global economy. increase.
Dry bulk shipping prices have skyrocketed to their highest levels since the 2008 financial crisis, but container prices have skyrocketed, supported by a recovery in global demand and port congestion. For consumers, it leads to higher inflation. But for some specialist hedge fund traders, it offers a sort of big price volatility they love.
Demetris Polemis, principal of Guernsey-based hedge fund Paralos Asset Management, said this year’s price increases and fluctuations in dry bulk rates “leaded to some of the best trading opportunities we’ve seen since launching Paralos in 2011. “. The fund, which manages approximately $ 450 million in assets and trades futures on the indices that make up the Baltic Dry Index, rose 110% until the end of November this year. This is the year of the highest returns since launch.
The emergence of Omicron variants and the high energy and commodity price limits “indicate a high but volatile market next year,” he added.
Pilgrim Global, an investment group run by former Fidelity Portfolio Manager Darren Mopin, has seen an increase of about 117% this year, according to figures sent to investors, and about three-quarters of this year’s profits come from shipping.
Funds that use algorithms to understand data patterns are also profitable. This includes AHL, a computer-driven unit of the $ 139.5 billion hedge fund company Man Group. The company’s evolution fund, which trades in a variety of markets, is making a profit of 16.9% this year.
Florin Court Capital, a London-based Quants Group, has risen almost 30%, supported by tank truck positions. London-based Quants Group Aspect Capital will also begin trading Baltic Dry Index futures next year.
Hedge funds have increased by an average of 8.7% in the first 11 months of this year, according to HFR.
Given the low returns and repeated boom and bust cycles, shipping has not been favored by many investors for years. It’s also a niche sector in the world of hedge funds accustomed to trading tricky markets, but in recent years some computer-driven funds have become more popular as they are looking for new untapped markets to bet on. ..
To gain exposure to this sector, some funds trade shipping stocks that operate oil tankers or dry bulk carriers. Others are betting on the movement of various Baltic Exchange futures contracts and contracts on certain routes, but it is still voice-mediated. Recent CME announcement A list of six container freight futures contracts on different routes, which Florin Court said it plans to trade.
After trading within the last decade, container and dry bulk rates have exploded this year, bringing rewards to the fund. The Baltic Dry Index, which measures rates for transporting commodities such as iron ore and coal by various transport routes, has risen 75% this year.Strong demand for goods and delays at ports due to coronavirus, such as border restrictions and a shortage of crew and pilots to guide ships, and Blockage of the Suez Canal March.
The index rose more than 300% in October before Chinese authorities intervened to push down coal prices, escalating problems at debt-owned real estate developer Evergrande. The Freightos Baltic container index, which tracks container shipping rates, has risen by about 180% and hasn’t fallen much this fall. Front-end pricing can be very variable, as shipping is similar to items that cannot be stored.
Hedge funds can benefit from such volatility. For example, Pararos bet this fall that volatility prices are too low compared to the threat of a typhoon in China. It scooped up options for the Capesize Index, the largest of the four categories of Baltic Dry Index ships. As the storm forced delays in the harbor, prices of such derivatives soared, with some rising more than 10 times.
Meanwhile, London-based Suberland Capital expected oil prices to rise this fall due to rising oil imports from China. Not only did they buy crude oil, but they also bought futures and tanker stocks, which sold out after the price rose in late October.
And while some managers returned some of their profits during the fall price decline, others were able to profit. Joakim Hannisdahl, CEO of Norway-based Cleaves Asset Management, profited 34% this year from a year-long surge in inventories before he began betting on falling prices due to lower interest rates. rice field.
With the rapid increase in Omicron infections, the government has begun to impose social restrictions again, and some fund managers expect some fares to remain high in 2022. According to traders, this can reduce capacity and increase push rates.
Renault Salur, a former Soros Fund Management trader and now head of Anaconda Invest, is increasing the position of oil tanker operators. Despite this year’s rise, prices in this region of the market are well below their mid-2000s peaks, but Saleur is pushing them up by a decline in ship supply as old boats are scrapped. I expect it.
Cato Brahde, Chief Investment Officer of Oceanic Investment Management, considers the variability of vessels as they move to cleaner fuels. He believes this could create “a super cycle of shipping and energy investment similar to what China experienced when it entered the global economy 20 years ago.”
Additional report by Harry Dempsey
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