Goldman alumni set up $1 billion macro fund with focus on commodities

By Dmitry Zhdannikov and Julia Payne

LAUSANNE, Switzerland (Reuters) – Jonathan Goldberg, the founder of one of the world’s largest energy-focused hedge funds BBL Commodities, is launching a new $1 billion macro fund with his former Goldman Sachs (NYSE:) colleague Ben Jacobs that will trade currencies and equity indices based on commodities trends.

The new fund was launched in March and is in the process of raising $250 million from founders with the remaining fundraising expected to close by the end of the year. BBL Commodities itself currently has some $500 million to $600 million under management.

The new fund will be a rare beast in the market where commodities are often being traded by macro funds based on macro-economic trends.

But Goldberg says the world will face a number of tectonic changes relating to commodities in the next few years that will be so big that they will allow the trading of entire countries based on them.

One of the trends, he says, is the upcoming change in global marine regulations in 2020 that will set a new upper limit for sulfur content in fuel used for shipping to cut pollution.

The rule will see a drastic reduction in demand for fuel oil, currently used in ships, and raise demand for cleaner, low-sulfur diesel. That in turn will depress the value of heavy, sulfurous from places such as Canada as they tend to yield more fuel oil than diesel.

“What happens to the balance of payments of Canada when your main export product gets less value? And who – which country and currency – does better in this scenario? That is what the fund will be looking at,” said Goldberg.

The Wall Street Journal was first to report about the launch of the fund.

The impact from new marine fuel regulations might be as big as if not bigger than those from the U.S. shale boom on the global oil industry, said Goldberg.

When U.S. shale oil production soared in 2012-2014, the world had an oversupply of 1 million barrels per day of oil, equal to around one percent of demand.

But when new marine fuel regulation comes into play, demand for diesel will probably increase by about 2 million barrels per day or by over six percent of current global diesel demand, said Goldberg.

He said the fund will be also look at currencies such as the Australian dollar and Russian rouble, interest rates and broad-based equity indices across commodity producers.

“People are saying the world will have a petrochemical boom. So we, for example, will be looking at what this boom means for broad indices,” said Goldberg.

He said the advantage of having a macro fund exploring commodity trends is primarily in having access to more liquid asset classes. “The gasoline market is simply less liquid than the Canadian dollar.”

Goldberg is fairly bullish on oil prices in the short term but in the medium term he expects crude to come under pressure as global demand growth is set to slow, OPEC cuts will end, while U.S. and Canadian output will increase on the back of improved efficiency.