Former Enron Corp. trader Ulf Ek guided his Northlander Commodity Advisors LLP hedge fund to a 50% return this year, capping a series of gains among commodities-focused investors profiting from unprecedented turmoil in global energy markets.
European energy prices have soared this year as Russia cut supplies of natural gas, sending power prices to record levels and governments rushing to protect consumers from the economic fallout. Fluctuating oil markets added to the volatility, opening up a chance for traders to cash in on the calamity.
Along with Northlander, returns at Westbeck Capital Management’s Energy Opportunity Fund soared about 41% through August, according to the London-based firm’s chief executive officer, Jean-Louis Le Mee. And Per Lekander’s $2.6 billion Clean Energy Transition LLP was up 15% through the end of August, driven by positions in power and oil, according to a note sent to investors.
Ek’s $423 million strategy rose more than 11% in August as Northlander capitalized on swings in the prices of natural gas and power. Chief Investment Officer Ek is optimistic that run can continue.
“We have every reason to believe Northlander’s good fortunes over the last few years can continue for the coming years,” Ek wrote in a letter to investors seen by Bloomberg.
Northlander’s returns -- following a jump of more than 140% last year -- come as European leaders prepare to take extraordinary steps to intervene in energy markets after Russia tightened gas flows to the region. Ek warned those efforts may not be enough to keep the lights on.
“It’s not an issue that can be easily rectified through regulation, as there is a potential risk of a real energy deficiency this winter,” Ek wrote. “The only way to reduce prices and reduce the risk of blackouts in Europe is to reduce demand.”
Ek declined to comment further when contacted by email.
Ek has spent his career trading European energy commodities, starting out with Enron in the late 1990s and then during stints at Deutsche Bank AG, Brevan Howard Asset Management LLP and Barclays Plc before starting Northlander in 2012. That experience has helped prepare him for a tumultuous year in European energy markets. Natural gas and coal prices have gained more than 200% this year, while benchmark power prices in Germany and France have risen even more dramatically.
In August, the fund gained from bets on volatility in the gas market. The firm also maintained bets that coal and oil prices would rise. Demand is increasing for the polluting fuels as users look for alternatives to burning natural gas.
While Northlander’s jump last year was driven by bets on Europe’s carbon price, the fund has curtailed those wagers this year. Carbon has traded in a relatively limited range this year and there could be a risk that politicians will intervene in the market as part of measures to limit price increases.
“Carbon trading is not the reason for the energy crisis and has had a very small impact on prices this year,” Ek wrote. “It might nevertheless come in the cross hairs of the regulator since it’s a market they can actually have an impact on.”
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