Hedge Funds Bet Against Oil, Shift Away from Solar Stocks Amid Economic Slowdown

Hedge funds are shifting their energy bets, with many now betting against oil stocks and unwinding short positions on solar. This reversal of positions dominated their strategies over the past four years. Funds have stayed net long wind stocks during the same period. The shift is attributed to concerns over oil supply and demand balance, as well as a rise in oil supply from OPEC+ nations.

Hedge funds are reversing their energy strategies, with many now betting against oil stocks and unwinding short positions on solar. This shift, which dominated their strategies over the past four years, reflects growing concerns over oil supply and demand balance, as well as a rise in oil supply from OPEC+ nations [1].

According to a Bloomberg Green analysis, equity-focused hedge funds have been mostly short oil stocks since October 2024, marking a reversal of their previous positions. Over the same period, funds have unwound short bets against solar stocks. The analysis, based on data from Hazeltree, an alternative-investment data specialist, shows that portfolio managers have stayed net long wind stocks during this time [1].

The shift is attributed to several factors. Todd Warren, portfolio manager at Tribeca Investment Partners, noted that there has been a "bottoming out with some of these clean energy plays." This trend coincides with concerns over oil supply and demand balance, as some OPEC+ member nations act to preserve their market share [1].

Joe Mares, a portfolio manager at Trium Capital, a hedge fund managing about $3.5 billion, highlighted that ratcheting up output has "not historically been great" for the oil industry. Evidence of an economic slowdown in the US and China, combined with an expectation that global oil inventories will continue to rise through 2025, means there’s growing skepticism toward the sector [1].

At the same time, there’s an expectation among fund managers that the continued rise in sales of electric vehicles (EVs) globally will reduce the need for petroleum. BloombergNEF estimates anticipate a 25% annual increase in EV sales this year and expects that about 40% of vehicles on the road could be electric by 2040, displacing 19 million barrels of oil a day by that year [1].

The strategy shift among funds reflects the fact that economic growth without low-carbon energy is now inconceivable, according to Trium’s Mares. "If we are going to continue to grow both in developed and emerging economies, we’re going to need a lot of energy. A big chunk of the marginal growth in energy over the last 10 years has come from renewables and it’s hard to see why that isn’t going to continue," he said [1].

This shift in hedge fund strategies is also supported by recent market developments. Oil prices dropped to their lowest in a week on Monday as markets digested OPEC+'s decision to implement another significant output increase in September [2]. This decision, which scrapped all voluntary cuts, is expected to further increase supply and put downward pressure on prices.

The reversal of hedge fund positions reflects a broader trend in the energy sector. While traditional oil majors continue to face challenges, companies like BP have made significant discoveries, such as the supergiant oil and gas field in Brazil, which could boost their morale and future prospects [2].

In conclusion, the shift in hedge fund strategies from oil to solar and wind reflects a broader trend in the energy sector. As concerns over oil supply and demand balance grow, and as the demand for EVs continues to rise, the energy sector is likely to see further shifts in investment strategies.

References:
[1] https://www.bloomberg.com/news/features/2025-08-10/hedge-funds-shift-bets-on-oil-and-solar-stocks-in-energy-reversal
[2] https://finance.yahoo.com/news/oil-drops-markets-digest-opec-150000553.html