Carlson Capital, the Dallas-based multistrategy hedge fund firm founded by Clint Carlson, is launching three new energy hedge funds.
In an e-mail sent to clients and obtained by Alpha, Carlson, who is also the firm’s president and chief investment officer, says that the recent sharp decline in oil prices “has created an outstanding environment” to invest in both the debt and equity of companies throughout the energy industry.
He also says the energy sector is now offering “the most compelling investment opportunities across all of the asset classes” that he follows heading into 2015, adding that the volatility and uncertainty in the energy markets present an opportunity to “capitalize on distortions in the debt and equity markets and to establish long-term investment positions in energy at distressed valuations well below those seen at the depths of the financial crisis.”
Carlson insists that this is not an attempt to call a bottom in the plummeting price of oil, however. “Regardless of the short-term direction of the commodity, there will be dislocations that can be profitably exploited on a hedged basis,” he explains. “Moreover, the liquidation of energy exposure is creating the opportunity to establish long-term exposure to the industry through securities that offer an asymmetric risk profile. Financial stress will create myriad situations where investors will be able to establish long-term positions with extremely attractive return characteristics.”
Carlson, who founded his firm in 1993, says it is qualified to capitalize in this area, highlighting its geographic location in Texas and its “outstanding track record” focusing on energy for more than 20 years. The firm, which manages more than $8 billion, employs eight portfolio managers and analysts specializing in the energy industry alone, with expertise in public equities, bonds, distressed credit and private equity.
Carlson points to Double Black Diamond, its flagship multistrategy fund, which now has energy investments in equities, credit and private transactions and is increasing its exposure to the sector. The fund is up 3.80 percent for the year through November, according to a document from investment bank HSBC that tracks hedge fund performance. The fund gained 7.91 percent last year and returned about 12 percent the prior year after losing approximately 1 percent in 2011. Its largest drawdown — played out over the second half of 2008 — was about 18 percent.
The three new funds are: Black Diamond Energy L/S, a long-short fund, which Carlson says will have a “variable net exposure to the sector of up to 25 percent long or short.” Black Diamond Energy Sector will be a long-only fund specializing in energy equities. It will charge a management fee as well as a performance fee tied to the outperformance of the energy benchmark.
Black Diamond Energy Credit Opportunity will be a long-short fund focusing on distressed investments, primarily in debt securities of energy producers. “The fund will be long-biased and seek to create long term strategic value through its investments in the industry,” Carlson explains in the e-mail. The fund will have a long lock-up with a benchmark, “and fee crystallization upon returns of capital.”
