After three years of calmer, range-bound activity, gas prices fell into a dramatic tailspin and volatility spiked, providing the kind of directional movement and intraday swings amid which such funds typically thrive.
Memories of the mid-2000s, when fortunes were made and lost in days, returned.
But with a few exceptions, the month was a wash for these billion-dollar funds, with managers in Houston and Connecticut failing to capitalize on the 16 percent slump in prices to a 10-year low amid tepid winter weather and an unyielding glut of shale gas.
According to a Reuters analysis of performance data provided by industry sources, the gap is widening between a handful of big winners and those who are trying to regain momentum after 2011, the worst year in over a decade for many commodity managers.
“When hedge funds see a lot of volatility in natural gas, they hop in to get a piece of the action,” said Kiplin Perkins, market data analyst at Parity Energy, an online platform for energy options trading.
Natural gas historically has been more volatile than many energy commodities as it is a smaller, U.S.-confined market compared to a global play like crude oil. Unlike oil or gold, where big macro-funds are active players, natural gas has tended to attract only a handful of specialized fund managers, with a total of about $12 billion or so of capital, according to data on the capital holdings of the funds involved.
Last year, gas was also one of the worst performing commodities, with prices falling more than a third while a few funds in the business posted some of the largest gains in the hedge fund universe.
That decline accelerated in January, when traders also saw a return to the kind of gyrations that were common in the years before 2008, when the financial crisis and rise of shale gas production cast a pall on the market.