Stockholm (HedgeNordic) – Northlander Commodity Advisors LLP’s flagship commodity-focused strategy, run by Swedish chief investment officer Ulf Ek out of London, has advanced 50 percent this year as Europe is facing an unprecedented energy crisis. The $423 million strategy, which has an emphasis on European power, European gas, European emissions and international coal markets, booked a monthly gain of 11 percent in August after capitalizing on swings in natural gas and power prices, according to a letter to investors seen by Bloomberg.
The year-to-date advance of 50 percent follows a return of more than 140 percent last year. Northlander Commodity Advisors LLP’s founder and chief investment officer Ulf Ek, who grew up in the town of Töreboda some 300 kilometers away from Stockholm, is confident his strategy’s strong performance run can continue. “We have every reason to believe Northlander’s good fortunes over the last few years can continue for the coming years,” Ek wrote in a letter to investors seen by Bloomberg.
“We have every reason to believe Northlander’s good fortunes over the last few years can continue for the coming years.”
Northlander’s strong performance comes amid a worsening energy crisis in Europe, with European leaders preparing intervention measures to step into its energy markets after Russia halted gas supplies via Europe’s key supply route. The steps undertaken by the European Union and the 27 member states in an attempt to improve its energy security may not be enough to avoid a major energy crisis in the coming months, according to Ek. “It’s not an issue that can be easily rectified through regulation, as there is a potential risk of a real energy deficiency this winter,” Ek wrote in the letter. “The only way to reduce prices and reduce the risk of blackouts in Europe is to reduce demand.”
“The only way to reduce prices and reduce the risk of blackouts in Europe is to reduce demand.”
Having started his career energy trading career at Enron the late 1990s, followed by stints at Dynergy, Deutsche Bank, Amaranth Advisors, Brevan Howard Asset Management and Barclays Capital, Ulf Ek started Northlander Commodity Advisors LLP in March 2012. His extensive career in energy trading helped him capitalize on high volatility and uncertainty in European energy markets. In August, Ek’s flagship commodity-focused strategy gained from bets on volatility in the gas market and also maintained bets that coal and oil prices would rise.
While Northlander’s 150 percent advance last year was attributable to bets on the price of European carbon credits, Ek’s trading strategy has maintained less exposure to carbon credits in 2022. European carbon credits have mostly traded in a relatively limited range this year amid increasing risk of politicians intervening in the market as part of measures to limit price increases. “Carbon trading is not the reason for the energy crisis and has had a very small impact on prices this year,” Ek wrote in the letter to investors seen by Bloomberg. “It might nevertheless come in the cross hairs of the regulatory since it’s a market they can actually have an impact on.”
Photo by KWON JUNHO on Unsplash
