Hedge funds started a year ago by a leading investment strategist, Barton M. Biggs, have been stung by losses this year, partly because of a bearish bet on the price of oil at a time when the commodity's prices are setting records.
Biggs, for nearly three decades a strategist at Morgan Stanley, set up his investment firm, Traxis Partners, in June 2003 with two other longtime Morgan employees. He now manages around US$2 billion in assets. Biggs, 71, was part of an exodus of scores of prominent Wall Street executives over the last few years who started hedge funds -- portfolios managed on behalf of wealthy investors and institutions like pension funds.
Biggs's funds were down more than 7 percent this year through July, net of fees, according to a letter to Traxis investors. A majority of the losses came in July, as the price of oil soared.
On Thursday, crude oil for September delivery settled at a record US$48.70 a barrel on the New York Mercantile Exchange. Futures prices have climbed more than US$10 a barrel since the end of June.
In his letter to investors, Biggs said he thought the price of oil should be closer to US$30 to US$34 a barrel. So convinced is Biggs of his investment thesis that he increased the size of his bet in July, even as prices were rising.
"When the price of an investment goes against us, unless the fundamentals have changed, our inclination is to buy more," he said in the letter.
Biggs said he considered oil overpriced because supplies were surging even as he anticipated a slowdown in the global economy. He also cited a "terrorism premium of at least US$12 a barrel in the current price."
Biggs did not return calls placed to his office on Thursday. His funds rose 16 percent last year, according to the letter.
His bearish bet on oil is the latest in a string of contrarian bets Biggs has made. He had a negative view on stock prices, for example, during much of the bull market of the 1990s, although he turned bullish in late 2002 just before the market hit its lows.
"In our previous lives, we have been through investment cold spells similar to this one," Biggs said. "Often the pain becomes most intense just before the turn."
Still, not all of Biggs's prior contrary bets fared well. Before he joined Morgan Stanley in 1973, Biggs helped run a hedge fund called Fairfield Partners, set up during the last big boom for hedge funds. Fairfield lost money in the early 1970s by shorting some highflying growth stocks. The stocks eventually dropped, but the bet was too early.
Biggs's decision to reenter the hedge fund business last year was certainly not against the grain. The number of hedge fund managers has increased tenfold since 1990, to some 3,000 firms.
"The hedge fund mania that now grips the US and Europe is rapidly assuming all the classic characteristics of a bubble," Biggs wrote to Morgan Stanley clients in 2001.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
SECURITY RISK: If there is a conflict between China and Taiwan, ‘there would likely be significant consequences to global economic and security interests,’ it said China remains the top military and cyber threat to the US and continues to make progress on capabilities to seize Taiwan, a report by US intelligence agencies said on Tuesday. The report provides an overview of the “collective insights” of top US intelligence agencies about the security threats to the US posed by foreign nations and criminal organizations. In its Annual Threat Assessment, the agencies divided threats facing the US into two broad categories, “nonstate transnational criminals and terrorists” and “major state actors,” with China, Russia, Iran and North Korea named. Of those countries, “China presents the most comprehensive and robust military threat