Carlson Plans Energy Hedge Funds to Exploit Oil Price DeclineSaijel Kishan
Carlson Capital, a $9 billion investment firm, plans to start three hedge funds to invest in the debt and equity of energy companies after oil prices slumped to their lowest in five years.
“This is not an attempt to call the bottom in the price of crude -- in the short term the price can clearly head lower,” founder Clint Carlson wrote in a Dec. 15 letter to clients. “Regardless of the short-term direction of the commodity, there will be dislocations that can be profitably exploited.”
Oil has slumped about 45 percent this year to trade below $55 a barrel amid slowing growth in world demand, rising production in North America and as the Organization of Petroleum Exporting Countries resists calls to reduce output. High-yield bonds of energy companies have tumbled 18 percent since oil prices peaked amid concern that a sustained slump will trigger a rise in defaults.
Carlson, based in Dallas, said price swings and uncertainty in oil markets present opportunities to make long-term investments in energy “at distressed valuations well below those seen at the depths of the financial crisis.”
One of the funds that Carlson plans to start, Black Diamond Energy Sector, will seek to outperform an exchange-traded fund, SPDR S&P Oil & Gas Exploration & Production, and will charge a management fee and and an incentive fee on the amount that it beats the energy benchmark, according to the letter.
Jonathan Gasthalter, a spokesman for Carlson at Sard Verbinnen & Co., declined to comment on the letter.
Carlson was started in 1993. Its main fund, the $6.3 billion Double Black Diamond, has gained 4.2 percent this year through November, according to a person with knowledge of the returns. The firm started a $950 million equity fund, Black Diamond Thematic run by Richard Maraviglia, which has gained 14 percent this year, the person said.