Bloomberg News

Ex-Bear Stearns Trader Starts Fund Betting on $300 Crude

November 18, 2011

(Updates oil prices in eighth paragraph.)

Nov. 17 (Bloomberg) -- Luca Baccarini, a former executive at Bear Stearns Cos., started an energy fund aiming to profit from oil prices that he says may reach $300 a barrel by 2025 as output from old fields is replaced by costlier production.

The LFP EFA Vision Petrole fund began this month allocating 15 million euros ($20 million) of seed money it received from French asset manager La Francaise Am. Baccarini’s Energy Funds Advisors SAS, the fund’s adviser, is in talks with other investors, he said in an interview.

Baccarini and Olivier Rech, a former International Energy Agency analyst and an EFA co-founder, are buying assets they believe will increase in value as oil prices rise. They expect the world’s biggest commodity to trade at $90 to $170 a barrel in the five years through 2017, and at $140 to $300 in the eight years through 2025 as output from aging fields is replaced by more expensive production methods, including biofuels, shale oil, gas-to-liquids and coal-to-liquids.

“We are predicting a long-term trend of prices going up,” he said by phone from Paris. “This will take place in a very volatile manner because there will be brutal adjustments in different market conditions.”

Baccarini left his job as a London-based managing director principal for power, gas and emissions in 2008 after the bank was bought by JPMorgan Chase & Co.

Costlier Capacity

Worldwide costs of developing production capacity have doubled in the past 10 years, and will continue to increase, the IEA said Nov. 9 in its annual World Energy Outlook. Incremental production tends to be in less favorable geology and in more remote locations, the Paris-based adviser of 28 industrialized consuming nations said.

New capacity is “going to be expensive to produce, and they are going to require a lot of new technology,” Baccarini said. “We’ll struggle to meet the evolution of demand, and it will require high prices to be able to find the equilibrium between supply and demand.”

West Texas Intermediate crude for January delivery was at $102.90 a barrel in electronic trading on the New York Mercantile Exchange at 3:30 a.m. local time. It rose yesterday above $100 for the first time since July 26. Brent crude for January settlement on the London-based ICE Futures Europe was at $111.66 a barrel, down 22 cents.

Ucits Fund

Vision Petrole is a so-called Ucits fund, which means it complies with a European directive known as Undertakings for Collective Investment in Transferable Securities. Ucits funds place restrictions on leverage, offer investors transparency of holdings similar to that of mutual funds and allow clients to withdraw money in as little as a day.

LFP EFA Vision Petrole investors will be able to withdraw capital with a week’s notice, said Baccarini, who also helped to found French energy trader Gaselys.

Ucits funds aren’t allowed to trade directly in energy and commodity markets, Baccarini said. Instead, Vision Petrole fund will invest in multiple assets linked to the oil price, such as exchange-traded funds, shares in oil producers and oil-service companies and currencies of oil producing countries, according to a fund presentation document dated November 2011.

--With assistance from Lananh Nguyen and Jesse Westbrook in London. Editors: Bruce Stanley, Raj Rajendran

To contact the reporter on this story: Lars Paulsson in London at lpaulsson@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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