Recent losses a la Amaranth Advisors have energy-focused hedge funds proceeding with caution, as a number of HFs in that sector have called it quits. “Hedge funds have been losing money recently,” Nigel Saperia of Glencore told Reuters, and that has had “a remarkable effect in terms of moderating behavior.” Yet, Reuters points out, there is growing oil-related activity on the New York Mercantile Exchange and ICE suggests there is still plenty of opportunity for new such funds to enter the market, albeit with some modifications. Speculators – namely hedge funds -- according to data from Commodity Futures Trading Commission, are shifting more to neutral rather than short positions – which observers say may account for the recent relatively flat price swings in oil. Investors are also modifying their behavior and after discovering that passive strategies did not protect them from losses, are taking a more active approach. “It’s part of the maturing of commodities as an asset class,” analyst Mike Wittner of Calyon said in a Reuters interview. Meanwhile, while firms are pulling the plug on their energy hedge funds, analyst Olivier Jakob of Petromatrix, believes fewer offerings are a bigger issue. “One of the problems is not that there are too many hedge funds,” Jakob told Reuters, “but that there are too few, which leads to too great a concentration, as evidenced in Amaranth.” In fact, he continued, “Compared to other markets, the hedge funds are underrepresented in the oil sector...Hedge funds have a much greater influence in other commodities.
