Energy hedge funds crushed despite market "screaming for investment"

Natural gas is flared at a Pioneer Natural Resources well in Texas.
Eddie Seal | Bloomberg | Getty Images

Sometimes the best investments are those that have been walloped.

That's what energy market traders—many of them at hedge funds down double-digits for the year—think of the opportunity in natural gas, electricity and other power-generating commodities outside of oil.

"The power market is screaming for investment. The challenges of the last two years have caused many to sour on allocating capital to longer‐dated trades. This has led to a downward pressure on prices that we believe offers tremendous value," power-focused hedge fund Elustria Capital Partners wrote in a letter to investors this month.

"The one challenge, clearly, is timing entry to the trades. It's impossible to know whether there will be a near‐term catalyst...to move the forward curve closer to fair value, or whether the current environment will require taking the positions to cash. Either way, we view the risk/reward as simply too great to ignore."

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