UPDATE 2-SandRidge hedge fund hit in June by natgas trades

* Houston-based $1 bln hedge fund takes hit in June

* Losses likely tied to bearish bet as prices rallied
(Recasts and updates with quote from investor, SandRidge’s
historical performance and industry comparison, paras 5-7)

By Barani Krishnan

NEW YORK, June 17 (BestGrowthStock) – SandRidge Capital, a $1 billion
energy hedge fund that also manages money for Citigroup
(C.N: ), suffered sharp losses in the first two weeks of June due to
bad bets on U.S. natural gas prices.

SandRidge, led by Texas-based trader Andy Rowe, fell by around
15 percent up to June 15 and is down more than 19 percent
year-to-date, according to performance estimates by a hedge fund
tracker which were seen by Reuters on Thursday.

Rowe told Reuters that the losses were a result of the gas
market moving against SandRidge’s trades. After initially
confirming the performance figures, he later said that the losses
were not as large, but declined to elaborate.

An investor in the fund also told Reuters that the firm had
suffered large losses during a month in which natural gas prices
unexpectedly surged by more than 20 percent.

“SandRidge got plastered,” the investor said in an e-mail.

SandRidge, which opened in 2002 and has Citigroup Managed
Futures as one of its investors, has an annualized rate of return
of 12.14 percent.

Its latest losses appeared to be higher than the industry
average tracked by Chicago-based Hedge Fund Research. HFR’s Energy
Index showed energy hedge funds in general down 2.3 percent in the
year to June 15.


Analysts say SandRidge probably had expected gas prices to
move lower in June, weighed down by growing supplies, but was
caught short when the market rapidly moved against the fund.

Natural gas prices peaked in January at just above $6 per
million British thermal units, then steadily lost ground through
the first quarter to below $4 by the end of March.

After trading mostly sideways for about two months, prices in
late May suddenly broke to the upside, spiking some 25 percent in
the last three weeks to above $5 as hot U.S. weather kicked up air
conditioning demand and rising tropical weather activity stirred
concerns about possible Gulf Coast supply disruptions.

The front-month contract in New York’s natural gas market
(NGc1: ) hit a four-month high of nearly $5.20 per million British
thermal units on June 15.

This week, traders turned their attention to key spreads
further down the curve as the March/April 2011 (NGH1-J1: ) spread —
a fund favorite as a way to bet on the relative strength of the
winter weather — suddenly spiked, stirring speculation of a
player being forced to liquidate a large position.

On Monday and Tuesday, that spread surged 18 cents to put the
March contract at a four-month high premium of nearly 44 cents, a
75 percent move amid trading volume that was more than double
normal levels.

Noncommercial traders, or speculative investment funds, were
holding record high net short positions in natural gas futures of
more than 205,000 contracts in late April, but have since pared
back their exposure to about 155,000 contracts, according to
recent data from the U.S. Commodity Futures Trading Commission.

Stock Market Today

(Additional Reporting by Joe Silha, Matthew Robinson and Jeanine
Prezioso; editing by Jim Marshall)

UPDATE 2-SandRidge hedge fund hit in June by natgas trades