Vista Hedge Fund Stops Betting On Oil That Made It A Fortune

The traders operating out of a two-story house in Rio de Janeiro, about four years ago, piled into a bet that oil prices would rise dramatically as a result of tight markets and a slower transition away from fossil fuels based on an expectation that the transition would take longer than expected.

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After placing that wager, Vista Capital rapidly surged to the top of the Brazilian asset management industry and became the country's best-performing hedge fund over the past three years based on its flagship fund.

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Plunging crude oil prices, however, are weighing on the fund's performance. This year, Vista Multiestrategia has lost over 7% after fees, compared to a basket of peers that gained 1.2%.

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Despite months of underperformance, the fund is now dismantling the trade amid growing concerns over global economic growth, the fund announced in an investor note.

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There is still uncertainty as to what will happen with demand in developed nations in 2023 after China reopened its market, in spite of the possibility that China's opening may be supportive of prices.

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“We decided to significantly reduce our oil position,” the fund said. 

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The bullish call, which at times was the fund's largest, has been trimmed by half, according to a person familiar with the matter.

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Further comments beyond the letter were declined by Vista.

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There have been several swings in oil prices as a result of concerns over the US tightening its monetary policy. The price of Brent crude has declined by about 43% since its peak last year, as risk appetite remains low despite further declines in equity markets. This week, Silicon Valley Bank was sent down tumbling again due to the turmoil surrounding it. 

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In 2014, Joao Landau and Joao Lopes founded Vista Capital as a partnership. Over the past few years, the firm has seen its assets under management rise from 30 million reais to over 6 billion reais ($1.1 billion) and profited from the wild swings in the commodities markets over the course of those years.

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As a minority shareholder, Vista has acquired Persio Arida, a former president of the Brazilian central bank, who is also a partner in the company. Last year, Vista acquired XP Inc., the country's largest brokerage firm, as a minority stockholder. Besides being the stepfather of Landau, Arida also serves as the chief executive officer at Banco BTG Pactual.

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Vista Multiestrategia Fund is up 77% in the past 36 months after fees, beating all 167 local hedge funds tracked by Bloomberg over that period. Over the same period of time, the Anbima Hedge Fund Index, which tracks a basket of local hedge funds, showed a rise of about 26%.

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