The Secret Club That Runs the World

The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders

Wow, the editor really got carried away with that title. We picked up a copy of Kate Kelly’s (great name) book ‘The Secret Club That Runs the World – Inside the Fraternity of Commodity Traders’ the other day, and after finishing it off – I think the title probably should have been something more like:  A few traders who took enormously large risks, made fortunes, lost fortunes, and then faded into relative obscurity. But, that might not have sold so well.

Beyond the critique of the title however, this was quite an entertaining read for anyone involved in the commodity futures markets – and especially the energy markets.  The book touches a lot of different areas, including profiles on former regulators Bart Chilton and Gary Gensler; the dangers of indexing commodities after a huge run up, and how commodities were the red headed step child at Morgan Stanley.

But those parts are mostly just filler between the more entertaining sections discussing the incredible ups and downs of Pierre Andurand and his Energy Trading Hedge Fund Blue Gold Capital Management (since closed down), the behind the scenes drama as physical commodity giants Glencore and Xstrata tiptoed around a merger, and the bizarre tale of huge proprietary trading masked as hedging at Delta Airlines.

The Andurand/Blue Crest story is worth the price of admission alone.  Andurand is like a characterization of a hedge fund mogul for a movie. There’s his 11 million pound house in London, Goldman Sachs ties, ownership in a kickboxing league, a custom Bugati sports car, Elton John playing at parties, and – of course – the proverbial Russian model for a wife.  And then there’s the incredible performance:  +209% in 2008, +55% in 2009, and +13% in 2010 as assets under management surpassed $2 Billion; followed by a terrible day in 2011 when the firm lost close to half a billion dollars (in a day!).  About 16 months later, the fund shut down and sent home all the money to clients. Past Performance is Not Necessarily Indicative of Future Results.

This quote summed up Andurand (and our amazement on how they could have raised over $2 billion):

Everyone knew of Andurand’s appetite for emormous bets – and his reputation for relaxed risk management.

Andurand has gone on to launch a new firm, Andurand Capital, which reportedly was one of the best performing funds in 2013, but we can’t help but imagine what one of our favorite authors, Nassim Taleb, might say about him.  Mr. Taleb might view the performance as little more than the personification of the role luck plays in investment outcomes. He may view Andurand as a human winning lottery ticket – the one trader out of tens of thousands trying to do the same thing who got the sequence of many best just right (although there were some that were notably wrong).  All we know is that we’ll keep rooting for the guy, so there’s more stories of mansions, private planes and model wives.

The rest of the story, excepting the regulator parts, is nearly as interesting – especially the stories around Delta Airlines mostly botched attempts at hedging their fuel costs, making for a good quick read that will have you at the very least, feeling a little emasculated over the size of your bets in the energy sector.

Write a Comment

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

logo0