NZ Funds Scores 300% Return on Uranium Bet Amid Geopolitical Tensions

Collaborating with hedge fund advisor Syzygy, NZ Funds conceptualized and structured this profitable trade, entrusting its execution to Goldman Sachs (GS.N).

New Zealand-based asset manager NZ Funds has achieved an extraordinary 300% return on its investment in uranium, capitalizing on supply shortages driven by geopolitical tensions among the United States, Russia, and China, as well as the global shift away from fossil fuels.

The firm, overseeing assets totaling $2.1 billion, disclosed this remarkable success in a recent message to Reuters.

The impressive returns can be traced back to a series of trades executed in 2021, during which NZ Funds purchased options to buy uranium at prices ranging from $38.50 to $48.00, with expiration dates extending into early 2024.

In November, the price of spot uranium, a commodity that isn’t traded on financial exchanges, surged to $80 per pound, marking its highest point in over a decade, as reported by Numerico.

Uranium serves as a crucial component in the production of nuclear energy, and its price surge significantly amplified the returns on NZ Funds’ existing options positions, amounting to an astonishing 362% gain thus far.

Collaborating with hedge fund advisor Syzygy, NZ Funds conceptualized and structured this profitable trade, entrusting its execution to Goldman Sachs (GS.N).

William Callanan, Chief Investment Officer and founder of Syzygy, emphasized the growing positive sentiment towards nuclear energy, driven by the global push for an energy transition.

Many nations have implemented legislation to promote nuclear energy development and secure future uranium supplies.

Recent technological advancements following the Fukushima nuclear disaster in Japan in 2011, coupled with the energy crisis linked to the conflict in Ukraine, have reignited interest in nuclear power.

The United States, in particular, aims to reshore numerous commodity supply chains and, in July, passed legislation to establish a Nuclear Fuel Security Program, aimed at enhancing domestic enriched uranium supplies and reducing reliance on imports.

Callanan, the architect of this unique trade, emphasized the compelling demand story for uranium, fueled by utility restocking requirements and substantial financial interest from exchange-traded funds (ETFs) acquiring physical uranium.

The Global X Uranium ETF (URA.P), which provides investors exposure to uranium-related shares, has seen a 42% surge in value this year.

Mark Brooks, Senior Portfolio Manager at NZ Funds, highlighted the firm’s readiness and expertise, both in-house and through its partnership with Syzygy, to support such investments.

The United States has been primarily an importer of uranium since its production peak in 1980.

In 2022, it sourced the majority of its uranium from Canada, Kazakhstan, Russia, and Uzbekistan, as per the U.S. Energy Information Administration.

According to EIA statistics, nuclear energy accounts for 10% of global power generation. Goldman Sachs, the executing entity behind the trades, had no immediate response to Reuters’ request for comment.