Commodities hedge funds have posted strong returns for a second consecutive year in 2021 as the energy transition created trading opportunities from crude oil to base metals.

The Bridge Alternatives Commodity Hedge Fund Index, which tracks some of the largest commodities-focused funds including Andurand Capital Management and CoreCommodity Management LLC, reported “positive double-digit performance” for 2020 and 2021, the firm said in a Wednesday statement.

A strong recovery from the global pandemic sent demand for commodities including oil, copper, soybeans and lumber surging, with some analysts and market participants bracing for a so-called “supercycle.” As the world looks to shift away from fossil fuels, demand for battery metals needed for electric vehicles also surged, creating trading opportunities.

“More opportunities could present themselves here throughout 2022 for the top hedge funds we track,” Bridge Alternative Investments Inc.’s Managing Partner Ryan Duncan said in the statement, citing themes such as the “ongoing shift to renewable energy, which is expected to create volatility in crude and refined products, natural gas, electricity and metals markets.”

The Bridge Alternatives Commodity Hedge Fund Index has two variations: an equally weighted index and an asset weighted index. Both rose by more than 19% last year after returning more than 20% in 2020. The assets raised by the funds in the index for this year rose to $13.82 billion from $10.26 billion last year, reflecting increasing investor appetite for commodities.

Bridge Alternatives’ index had about twice the return of the Bloomberg All Hedge Fund Index and outperformed the 14.3% average gain of commodities funds, according to Bloomberg data. The last two years for commodities-focused funds marks a departure from the relatively poor performance of the past, when such funds faced increased competition from computer-driven trading and weak prices.

Smaller funds within the index also saw strong returns. Commodity trading hedge fund Northern Trace Capital LLC had returns of more than 27% last year, according to a person familiar with the matter. The firm manages more than $400 million in assets.

--With assistance from Katherine Burton.

This article was provided by Bloomberg News.