Hedge funds across the US and the UK have been taking advantage of dumped oil and gas stocks, and are now reaping significant benefits as the global energy crisis heats up.
As institutional investors dumped their fossil fuel stocks in droves in an effort to better align with environmental, social, and governance (ESG) standards, some hedge funds have been swooping in to take advantage of the abandoned returns, which are now set to surge amid the energy crisis. “They [big institutional investors] are all so keen to get rid of oil assets, they’re leaving fantastic returns on the table,” said London-based Odey Asset Management founder Crispin Odey to the Financial Times.
“It’s such a great and easy idea,” Odey added, as his hedge fund has risen by over 100% since the beginning of the year, after taking on considerable stakes in Norwegian-based oil company Aker BP which is up 43%, and Asia-based Jadestone Energy, which has risen 44%. As major institutions have moved into ESG-friendly stocks in lieu of fossil fuels, hedge funds— which face less pressure to abide by environmentally-conscious standards— have taken advantage of the opportunities being left behind.
Pension funds, churches, universities, and other like-minded investors have committed to liquidating shares of companies that are related to the fossil fuel industry, and have instead taken positions in firms that focus on addressing climate change and renewable energy. However, with the ongoing energy crisis in Europe and Asia that is spreading to the rest of the world, oil and gas production is significantly still in demand, as other forms of greener energy simply cannot meet energy supply needs.
US-based hedge fund Bison Interests has also been on an oil and gas purchasing spree, earning profits from major companies such as Canadian-based Baytex Energy Corp and US-based SandRidge Energy, pushing its growth up by 377% since the beginning of the year. “Many of these companies are trading at very low cash flow multiples and at very big discounts to the replacement value of their assets,” said Bison Interests co-founder Josh Young. “People don’t understand how much money you can make in things that people hate,” he added.
Information for this briefing was found via the Financial Times. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.