Energy Investments Pay Off for Clive Capital Hedge Fund

Chris Levett’s Clive Capital LLP gained as much as $230 million in May after betting oil, power and coal prices would fall as oil tumbled as much as 12 percent, two people with knowledge of the fund said.

The $3.3 billion hedge fund rose about 7 percent in the first three weeks of the month, erasing its loss for the year, said the people, who declined to be identified because the company’s performance is confidential. Clive’s Class B shares had declined 4.8 percent in the first four months of 2012, according to a report to clients obtained by Bloomberg News.

Brent crude, the benchmark for more than half of the world’s oil, dropped 11 percent in the month through yesterday, the biggest decline since May 2010, and 10 percent in the first three weeks, as slowing economic growth in China and Europe’s escalating debt crisis cut demand, while concern that Iran will disrupt shipments from the Middle East eased. U.K. month-ahead gas fell 12 percent, European 2013 coal slipped 6.5 percent and German next-year power lost 3.1 percent this month.

“Given our softer economic outlook, we are very happy to continue to run our negative-bias energy positions in oil, coal and European gas and power,” Clive said in the report, which was sent to investors this month. The fund added to bets that oil will decline and ended wagers that U.S. natural gas will drop, according to the report.

U.S. gas for next-month delivery has climbed 37 percent since reaching a 10-year low of $1.902 per million British thermal units on April 19. It traded today at $2.617.

Elizabeth Holstein, who oversees investor relations at London-based Clive, declined to comment on the returns.

‘Good’ Supply

Oil will fall because of “good” supply from the U.S., Saudi Arabia, Russia and Iraq, while demand around the world appears “weak,” according to Clive’s letter. Global oil supply increased by 0.6 million barrels a day to a record 91 million in April, the International Energy Agency said in its most recent monthly oil market report on May 11.

Oil rebounded yesterday from a seven-month low as talks to ensure Iran’s nuclear program is peaceful stalled. Brent crude rose 0.4 percent to $107.10 a barrel at 12:36 p.m. in London today.

Crude won’t fall much further, because the Organization of Petroleum Exporting Countries will cut production if it approaches $100 per barrel, according to Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.

Iran Premium

“The nuclear talks yesterday didn’t produce any meaningful results,” he said in a telephone interview today. “That will add risk premium.”

Commodity hedge funds, which dropped 3.6 percent last year, climbed 1.6 percent in the first four months of 2012, according to the Newedge Commodity Trading Index. Clive fell 10 percent in 2012, its first losing year since Levett, 42, started the firm in 2007. He was formerly a trader at Moore Capital Management LLC, the $15 billion hedge fund founded by Louis Moore Bacon.

Hedge funds focused on commodities have been closing as the firms fail to make money for clients and lawmakers in the U.S. impose stricter regulations on energy traders.

Fortress Investment Group LLC said this month it would liquidate a $500 million commodities fund after it lost almost 13 percent in the past four months. Billionaire trader John Arnold told investors on May 2 he would shut his Centaurus Energy Fund, while BlueGold Capital Management, a $1 billion fund in London, decided in April to close after tumbling 34 percent in 2011.

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