Cumulus Energy Fund, a European gas and power hedge fund with $176 million under management, surged 39 percent in December after correctly predicting a slump in German electricity prices.
The increase in its Class A U.S. dollar shares led to a 2012 gain of 24 percent and a 400 percent return since inception in 2006, according to a letter sent to investors and obtained by Bloomberg News.
“The main driver was a very large gain from German power, where extremely bearish weather caused a complete collapse in spot prices over the Christmas period,” London-based Chief Investment Officer Peter Brewer wrote in the letter. “This was supported by gains in all other markets (especially U.K. natural gas and Nordic power), with the sole exception of coal hedges.”
German power for 2013 delivery, the European benchmark, slumped 4.3 percent in December, the biggest monthly decline since October 2010, according to broker data compiled by Bloomberg. It dropped to a record 44 euros a megawatt-hour on Dec. 27 as day-ahead prices turned negative.
Germany seeks to generate more than a third of its electricity from renewables as the country exits nuclear energy. Utilities including EON SE and RWE AG may prefer to pay users rather than halt fossil fuel-fed plants when turbines and solar cells push power supply above demand.
Brewer didn’t immediately answer calls to his office and mobile phone.
Cumulus Energy Fund was bought last year by City Financial Investment Co., a London-based asset manager that also owns Cumulus Fahrenheit Fund, a weather derivatives fund focused on the Chicago Mercantile Exchange.