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Net Net: Promoting innovation and managing change

Low oil prices = instability: Top hedge fund manager

Michael Hintze
David Grogan | CNBC

A top hedge fund manager is worried about what the continued low price of oil could mean for the global economy.

"A persistently low oil price could affect producers' ability to maintain domestic infrastructure and in the medium term be a force for geopolitical instability," Sir Michael Hintze, CEO of $14.1 billion hedge fund firm CQS, said in a letter.

Hintze did say that low crude prices would be "broadly-speaking, positive for the global economy." But he noted that the big decline was driven by lower economic growth and not just expanded supply from factors like U.S. shale reserves.

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In the short term, the biggest effect will be on indebted oil-producing countries.

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"One should not underestimate the potential impact of such a sharp fall on regional economies and companies," Hintze said.

He noted that many governments need much higher oil prices to balance their budgets. Countries that could be forced to cut spending include Russia, Iran, Iraq and Nigeria, all of which need oil at more than $100 a barrel to meet their obligations. WTI crude oil was trading around $58 on Friday.

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Founded in 1999, London-based CQS manages hedge and long-only funds across a variety of strategies.

The firm's largest vehicle, the CQS Directional Opportunities Fund, which invests in stocks, bonds and derivatives, is up 3.7 percent this year through November, according to performance information obtained by The CQS Diversified Fund, which invests in other CQS vehicles, is up 1.15 percent through November. The Absolute Return Multi-Strategy Index, which tracks similar hedge funds, gained 4.45 percent over the same period.

A spokesman for CQS declined to comment on performance.

CQS founder Hintze is worth an estimated $1.8 billion, according to Forbes. Australian by birth, he was knighted in the U.K. in June 2013 for his arts-related philanthropy there.