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Statar Capital: Fundamental, Relative Value, Natural Gas Trading

A unique, ultra-unfashionable strategy

Commodity prices tend to crash upwards while equities crash downwards. But the November 2018 spike in natural gas volatility was, in some respects, analogous to the February 2018 spike in equity volatility. Both events inflicted double digit losses on a number of funds, and spelt the demise of others (such as the XIV ETF, and optionsellers.com) that had substantial short volatility positioning. Yet certain managers also profited from the market action, including Ron Ozer’s Statar Capital GP LLC (Statar), which has maintained a long volatility bias for most of its track record.

Since inception in September 2018, Statar has delivered a Sharpe ratio of over 2.0 and importantly has kept its volatility just shy of the 16% annualised target, even as natural gas’s implied and realised volatility surged into triple digits. In fact Ozer has somewhat surpassed his annualised return target of 20%, which is based on mid-teens volatility and a Sharpe ratio of 1.5. The return profile has also shown minimal correlation to commodities (as measured by the Bloomberg Commodities Index) and equities (S&P 500).

Ozer has spent almost his whole career trading natural gas. He was most recently co-head of US natural gas trading at Citadel. Before that he spent six years at DE Shaw & Co, where he was given a great deal of autonomy to trade natural gas. Internships at Lehman Brothers and Morgan Stanley piqued Ozer’s interests in trading, so much so that he graduated a year early from MIT with a BS in Math and a Minor in Economics.

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