Hedge Fund Superstar Pierre Andurand Sets His Sights On Clean Energy After 154% Gain

Last February, commodities trader Pierre Andurand was sitting at a dinner in London with some of the oil market’s biggest players. It was International Petroleum Week, a gathering of executives and market participants, and Coronavirus was spreading like wildfire through Asia and Europe.

Andurand had a dire prediction for his peers: Oil could trade at negative prices if the world entered lockdowns as Covid-19 spread further.

He laid out why the spread of the virus would quickly exhaust hospital beds, forcing governments worldwide to enact stringent lockdowns. Such restrictions, however, would sap some $20 billion a day in oil demand worldwide due to plunging orders for jet fuel and commercial and passenger transport. The ensuing glut of supply, he predicted, would quickly overwhelm storage capacity at hubs like Cushing, Oklahoma, creating an almost existential problem for anyone long the commodity and taking delivery.  

For weeks, Andurand, a French-born mathematician with a masters degree in mathematical and theoretical physics from Oxford University, had been applying his rigorous analysis of data—normally used to spot trends in financial markets—to Covid studies published in journals like The Lancet and the New England Journal of Medicine. As he parsed the studies, he concluded that the medical community was underestimating the burdens Covid would place on hospitals and intensive care units. Specifically, he dismissed evidence indicating declining case fatality rates, believing, instead, it masked the threat because the most alarming data coming from hospitals was being reported at a significant lag.

By late February, as oil executives networked and mingled at the InterContinental Hotel in London’s tony Mayfair district, Andurand was bearish on energy and had built a large short position in Brent crude and West Texas Intermediate through futures markets. “The street was really oblivious to what’s going on,” Andurand tells Forbes. “They didn’t really understand the potential demand shock that the Coronavirus would generate.”

Within weeks, the United States and European Union entered mandated lockdowns to curb the spread of Covid-19, roiling energy markets. As financial markets went haywire, energy commodities took an enormous leg down when a price war broke out within the Organization of the Petroleum Exporting Countries, as Saudi Arabia challenged Russia by flooding the market with oil. “Russia and most of the OPEC members were oblivious to [Covid] as well,” reflects Andurand, “They didn’t realize the impact on demand.”

In March, oil markets briefly went negative, as Andurand had predicted, and the industry faced its deepest slump in decades. According to sources, Andurand’s various funds gained between 60% and 155% that month as energy prices plunged. (Andurand declined to comment on his performance).

By April, with governments enacting stimulus and markets having hit extreme lows, Andurand’s hedge fund exited the short trade and spent the remainder of the year largely in cash. He was generally bullish on the idea that oil had hit bottom, but fearful of a second Coronavirus wave. Andurand’s funds ended the year up between 69% and 154%, holding onto gains from March, and have dramatically outperformed commodities markets on a long-term basis. 

He entered 2021 with a mostly neutral market position due to variations of the disease and his fear about spike protein mutations seen in South African and European strains. “The problem with this virus is that as more people get it, the probability of a mutation goes up,” says Andurand, “That’s why I think the strategy that a few countries had to let it spread was totally crazy.”

While Andurand entered the new year unwilling to get substantially long energy markets, he’s found opportunity in commodities that touch the clean energy revolution. In fact, Andurand is bearish on oil’s long-term prospects and sees the renewable energy industry at the market to go long.

Presently, Andurand believes the price of carbon emissions, which predominantly trade in Europe, are substantially undervalued. He’s long European Union Emissions Allowances, which he believes should be valued at GBP70-per ton. Andurand is also a believer that the emissions regime is essential to putting a fair social price on climate warming pollution.

“For COVID, there is the vaccine,” says Andurand, “But for climate change, it gets worse every year, and then you get stuck… The price to put carbon in the atmosphere should be really punitive.”

Andurand has become so bullish on clean energy, he’s planning to launch a long/short fund that will have a mandate to expand beyond futures markets and into equities. The fund would give him the ability to betting on emerging clean technologies at the expense of declining carbon producers, which he believes are substantially overvalued due to rising emissions costs and peaking demand.

“We think that oil demand will peak around 2027, then be stable for a few years. and then decline relatively fast in the 2030s,” he adds, “It will create opportunities in oil trading. For us, it will also create opportunities in energy transition—not just oil— but also natural gas, power, emissions, and like copper and nickel that will benefit from more electrification.”

There was perhaps no trader in the world who navigated oil markets at scale better than Andurand in 2020. But he’s starting to move on from the carbon industry. 

“A lot of companies will be profitable. At the end of the day it’s about demand, “ says Andurand of clean energy. “I think it’s a sustainable business, both for the environment and financially.”