Hedge funds around the world fled positions in energy stocks, bonds and futures last week just in time to miss this week's whipsaw moves in oil, according to data from two banks.
And on Friday, oil prices hit their lowest since January as recession fears gripped world markets. Brent crude is still up about 12% in the year to date.
Hedge funds that trade with systematically programmed algorithms did not necessarily short the market but rather, vacated their positions because of a lack of any trend in the prices of oil, gas and other energy products, said David Gorton, the founder and chief investment officer of DG Partners, with $2.85 billion under management.
"Our commodities exposure is the lowest it’s been in years. In June, markets reversed hard and commodities have been chopping down and sideways ever since. For a trend follower that’s a nightmare and why the model got out," said Gorton. DG Partners is up 5.2% so far this month and 37% for the year, according to a source familiar with the matter.
The momentum that fueled a stable upward rise in oil prices has changed, said another manager who oversees more than $100 billion and for compliance reasons wished to remain anonymous.Reporting by Nell Mackenzie Editing by Mark Potter and Peter Graff
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