Beyond long only

Rising oil prices have attracted a growing number of hedge funds to commodities. But with crude oil surging to record highs, hedge fund managers are being forced to take a different approach to long-only strategies. By Alexander Campbell

Even before Hurricane Katrina shut down more than half the oil production capacity of the US southeast, energy prices were at abnormally high levels. In nominal terms, the $70.80-a-barrel peak that the benchmark Nymex West Texas Intermediate (WTI) crude oil contract reached on August 29 was a record high. Even adjusting for inflation, it comes fairly close to the record of $88 a barrel (in 2005 dollars) reached in 1979. And there is little hope of respite – few expect a return to the $22–28