Commodity hedge funds emerge as big winners in the energy transition for two consecutive years of strong returns

As the energy transition creates trading opportunities from crude oil to base metals, commodity hedge funds deliver strong returns for the second consecutive year in 2021.

The Bridge Alternatives Commodity Hedge Fund Index, which tracks large hedge funds focused on commodities, reported that it achieved positive double-digit returns in 2020 and 2021. Funds tracked by the index include crude oil hedge fund Andurand Capital Management, CoreCommodity Management LLC, and others.

The global economy's recovery from the pandemic has also driven soaring demand for commodities such as oil, copper, soybeans and timber, and some analysts and market participants are preparing for what's known as a "super cycle." As the world seeks to move away from fossil fuels, demand for electric vehicle battery metals has also surged, creating trading opportunities.

Ryan Duncan, managing partner of Bridge Alternative Investments Inc., said in a statement: "More opportunities are likely to emerge in 2022 for the top hedge funds we track. He mentioned topics such as "The shift to renewables could create volatility in crude and refined oil, natural gas, electricity and metals markets." ”

There are two variants of the Bridge Alternatives Commodity Hedge Fund Index: an equal weighted index and an asset-weighted index. Both have returned more than 20 percent in 2020 and rose more than 19 percent last year. The assets raised by the funds in the index increased to $13.82 billion this year from $10.26 billion last year, reflecting growing investor interest in commodities.

The data shows that the Bridge Alternatives index returned about twice as much as the hedge fund index tracked by Bloomberg and also exceeded the average return of 14.3 percent for commodity funds.

The smaller funds in the index also received strong returns. Commodities trading hedge fund Northern Trace Capital LLC returned more than 27 percent last year, according to people familiar with the matter. The company manages more than $400 million in assets.