London based Institutional investment consultant, Absolute Return Partners (ARP) has launched the ARP Energy Fund, a multi-manager solution for investors wishing to gain exposure to energy markets without taking on additional equity exposure.
The Fund, an Alternative Investment Fund, has an absolute return target of 12-17 per cent net per annum and consists of a concentrated portfolio of energy funds, each with a minimum 3-year track record and a combined total of over US$1 billion of assets under management. The rationale for the Fund is based on ARP’s belief that fundamentals have created a wide trading range for oil and volatility is likely to remain high.
“ARP is chiefly an adviser to pension funds and family offices. The end of cheap (and expensive) oil is one of the key structural trends that we think will shape the economic and investment landscape for generations to come. However, investing on the basis of this outlook requires significant research experience and resources so we have set the Fund up for our clients to access this theme in the most cost-effective manner,” says ARP’s managing partner, Nick Rees.
“Despite what one might think the world is running out of cheap oil,” says ARP CIO, Niels Jensen. “Because supply and demand for oil are very inelastic, small changes in either can have a big impact on price. The shale revolution has put a lid on oil prices. Shale producers have the flexibility to meet global demand quite quickly by re-establishing supply so we expect oil to trade in a range of $40-80 in the foreseeable future, but within that band there will be some considerable volatility.
“Commodity trading strategies thrive on volatility. By combining funds which focus on specific commodities, or that are nimble enough to trade across strategies, we believe the return target is realistic and is in line with the historic performance of the underlying funds,” he adds.
