Kingdon Capital Management turned bearish on crude oil and increased investment in solar companies, as the hedge fund firm gained 13.4 percent in the first half of the year.
Mark Kingdon’s $2.6 billion firm sold some oil company shares in June, added short positions and placed bets that would profit if crude prices fell after OPEC and U.S. producers unexpectedly increased production, according to a July 20 letter sent to investors.
“With the U.S. rig count on the rise and the potential for Iranian volumes to come back on line, the time at which the oil market comes into balance has been pushed out,” the firm said.
Oil relapsed into a bear market in New York as resilient U.S. output, rising OPEC supply and threats to Chinese demand keep a global glut in place. West Texas Intermediate futures dropped 1.5 percent on Thursday to close at $48.45 a barrel. The grade has lost 21 percent in the past six weeks, meeting the common definition of a bear market.
Kingdon increased bets on solar energy, buying a stake in TerraForm Global, a unit of SunEdison Inc. set to go public in the third quarter. It already has a stake in the parent company, whose shares have gained 36 percent this year, and TerraForm Power, another SunEdison unit that owns wind and solar power plants.
Overseas, Kingdon sold its Chinese shares trading in Hong Kong in the second quarter, as mainland China stocks tumbled about 25 percent since mid-June, dragging down the so-called H shares. Kingdon told investors it made money in the equities and plans to buy again once prices have fallen to a more realistic level.
Health-care companies represent Kingdon’s biggest position, the letter said, with Horizon Pharma Plc and Anacor Pharmaceuticals Inc. both top five positions.
Kingdon’s performance in the first six months of this year compares with a 1.2 percent gain for the Standard & Poor’s 500 Index, including reinvested dividends. Hedge funds returned 3.7 percent, on average, according to data compiled by Bloomberg.
Patrick Clifford, a spokesman for Kingdon at Abernathy MacGregor Group Inc., declined to comment.
(A previous version of this story was corrected to show Kingdon’s firmwide assets.)