A new report issued Thursday by U.S. Institute for Energy Economics and Financial Analysis (IEEFA) found that major hedge funds have lost billions by betting speculatively on oil companies which were already steadily declining in value.
The companies on the wane include ExxonMobil, Chevron, Royal Dutch Shell, and BP, "all of which have underperformed the market during the last decade," the study stated. The IEFFA conducts research and analyses on financial and economic issues related to energy and environmental issues.
The report said that, in particular, the speculative strategy of one leading energy hedge fund, BlackRock, cost its wealthy investors 90 billion U.S. dollars, and did not protect them from market risk by investing in newer, renewable energy alternatives whose share prices were increasing during the last 10 years of overall economic expansion.
According to Tim Buckley, IEEFA director of energy finance studies, BlackRock has an enormous amount of capital under management, thus sets the pace for other hedge funds which follow its lead. "As the world's largest universal owner (of corporate equities), BlackRock wields an enormous amount of influence, and shoulders a huge responsibility to the wider community," he added. "Yet to-date it remains a laggard."
The report indicated that hedge funds would do well to invest in new energy opportunities, like the trillion-dollar Norwegian Government Pension Fund Global which recently announced its divestment from oil and gas. Other hedge funds are now following Norway's strategy for growth of shareholder wealth, said Buckley.
Other analysts agreed that hedge fund bets on traditional firms missed the mark during the last decade, but the company is making progress again, and is investing heavily in renewables to increase profitability.
"Bullish sentiment is back," Tom Kool, editor of OilPrice.com, told Xinhua, noting that there are also solid oil investment opportunities in emerging markets like Vietnam, Pakistan and South Sudan.