Boone Pickens' BP Capital Investors Withdraw Money ~ market folly

Tuesday, October 28, 2008

Boone Pickens' BP Capital Investors Withdraw Money

In what seems like an endless cycle of hedge fund withdrawals and redemptions, it should come as no surprise that investors in Boone Pickens' BP Capital hedge funds are seeking their money back. Let the redemption bloodbath begin. And, it seems as if BP Capital is partly responsible for the massive sell-off in energy equities.

We first got word of Boone's poor performance towards the end of September, when we noted that his equities fund was -30% through august, and his commodities fund was -84% through the same period. In his recent appearance on "60 Minutes," Boone noted that he and his firm had lost around $2 billion since the peak in June. And, in a recent WSJ article, they note that nearly 50% of investors are withdrawing their money from the fund, which has seen losses of nearly 60% now. They also note that Boone moved nearly everything into cash a few weeks ago, to protect from further downside risk.

So, its clear that Boone was one (of I'm sure many) hedge funds who were selling off entire positions over the past few weeks. As we detailed in our most recent look at BP's portfolio holdings, Boone runs an energy-centric equities fund. So, some of his holdings such as Transocean (RIG), Suncor (SU), Occidental Petroleum (OXY), Schlumberger (SLB), Halliburton (HAL), Chesapeake (CHK), and many more listed here have undoubtedly seen selling over the past few weeks due to Boone moving to cash. Obviously Boone wasn't solely responsible for the drop-off, but it looks like he was definitely one of the culprits. We won't know for sure which, if any, of his positions he is still holding until the next 13F filing is released in the coming weeks. But, it sounds as if he has hardly any positions right now as he prepares to meet investor redemptions/withdrawals.

The cycle of hedge fund redemptions/withdrawals undoubtedly will provide ample opportunities, which I recently detailed here. But, they will require patience and discipline to scale into the names as there is absolutely no way to gauge when the carnage will pass. Energy equities are by far some of the biggest casualties of the sell-off and are thus some of the most attractive for longer term investors. And, for once, I actually agree with the analyst community, who point out attractive opportunities in the energy sector. But, then again, those opportunities could get even more attractive as we undoubtedly face strong waves of continued forced selling.

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