Hedge Fund BlueGold's Investor Letter (November) ~ market folly

Monday, December 21, 2009

Hedge Fund BlueGold's Investor Letter (November)

This is the first time we've covered BlueGold Capital Management so here's their background: Founded by Pierre Andurand and Dennis Crema, BlueGold is a London based hedge fund that trades in commodities markets, primarily in oil derivatives. Before founding the firm, they were both senior oil traders at Vitol S.A. and they seek absolute returns "through discretionary fundamental trades, directional and relative-value." They were up a whopping 209.4% for 2008, a year in which many other hedge funds struggled. Year to date for 2009, BlueGold is up 59.8%. Given that BlueGold primarily trades crude oil, we'd be remiss if we didn't include a technical look at crude oil for reference.

Their November investor letter provides some interesting commentary on the economy on a macro level. Specifically, their macroeconomic thoughts are pinpointed in a few main talking points. Firstly, Stephen Jen (the author of this section of the letter) feels that the world will gradually recover and should continue on this course at least until next summer. He feels recent risks such as Dubai's crisis are more-so a temporary distraction rather than a fundamental problem that will begin a wave of sovereign defaults.

This is interesting because it is in stark contrast to thoughts of fellow hedge fund manager Kyle Bass of Hayman Advisors. We've previously covered Bass' prediction of massive sovereign defaults. So we'll have to see who ends up right in this regard, Bass or Jen. Keep in mind that as far as we know, Jen doesn't have any positions on in the sovereign arena, while Bass has been betting on sovereign defaults in his hedge fund.

There are a few more bullet points worth highlighting in BlueGold's commentary as we see that Jen feels that global economic data has been and will continue to be broadly constructive. He also believes that the Fed will not use interest rates to keep asset prices in check. Overall, a much less pessimistic view than what we have seen from other hedge funds. Check out Stephen Jen & BlueGold Capital Management's in-depth macro thoughts via their November investor letter below:

*Update: The document has been removed per the request of representatives from BlueGold. Sorry for any inconvenience.

We'll continue to cover intriguing hedge fund portfolio movements and investor letters. In the mean time, we've just recently outlined hedge fund Woodbine Capital's thoughts on gold and highly recommend reading it given all the buzz around the precious metal lately.

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