Hedging advisory of the year: Aegis Hedging Solutions

Aegis Hedging Solutions has been awarded Energy Risk’s hedging advisory of the year award for the fifth year. Amid the oil price crisis and the Covid-19 pandemic last year, the company grew its client-base and revenues. It also entered the metals markets with one of three acquisitions made at the end of 2020 and during the first half of 2021.

The acquisitions were in part supported by the addition of a second investor in Aegis in October 2020, Trilantic Capital Partners. A month later, Aegis acquired commodity trading adviser and metals specialist Nexidus Commodities. This has provided Aegis with important new insights.

“Metal prices have a significant impact on oil & gas producers. Steel is one of the largest costs linked to well completions,” says Bryan Sansbury, chairman and chief executive of Aegis. “And so, in addition to positively impacting our core business of energy, these new metals capabilities will enable us to expand into manufacturing and other industry verticals where there is a need to manage risks relating to steel, copper, nickel, precious metals and so on.”

Aegis completed a second acquisition in mid-December 2020 when it purchased competitor Risked Revenue Energy Associates. This deal brought an impressive analytics offering, more internal expertise and a new set of clients.

“Risked Revenue has a patented set of analytics that they have been using in the upstream oil & gas sector, applying a set of rational analytics to different price scenarios to predict cashflow,” Sansbury says. “There’s a time and a place for having a view on price, but it’s also important to underline that with a set of analytics that are rational and aren’t about timing the market.”

Aegis announced a third acquisition in May 2021 with the purchase of energy/commodity trading and risk management (E/CTRM) software provider Instanext. According to Chris Croom, president of Aegis, this will further strengthen the firm’s technology stack, already a central element of its offering to clients.

This part of the business was particularly important in 2020, when Aegis implemented several timely technology developments that made life easier for clients that were working remotely, according to Croom. This included digital capabilities for signing trade confirmations and for month-end settlement processes. “Our clients have been able to enjoy a fully digitised process with trade information coming into our platform, where they can review the documents, digitally sign and send back,” he says.

Our platform will ensure everybody gets the exact same information at the same time, with bids and offers submitted online and participants able to see where their bids rank and change them in real time

Bryan Sansbury, Aegis

In another development linked to its technology platform, Aegis applied to become a swap execution facility (SEF) in March 2021. Sansbury believes this move, which he expects to be approved by the Commodity Trading Futures Commission later this year, will provide a new way for clients to benefit from the firm’s technology offering, which will underpin the SEF.

“Our platform will ensure everybody gets the exact same information at the same time, with bids and offers submitted online and participants able to see where their bids rank and change them in real time,” says Sansbury. “All communication will be issued via our technology and the details of those trades will be stored. We believe everything about the transaction will fundamentally change through the use of the technology.”

For all the time and effort Aegis has put into developing its technology platform and growing the firm through acquisitions over the past year, advising clients on hedging strategy remains its primary focus. And in 2020, its skills and expertise in this area were put to the test.

David Pond, who was appointed chief revenue officer at Aegis in January 2021 after 17 years at EY, says the firm’s agility is a core strength that paid dividends last year. “The ability the organisation has, not only to address black swan events like Covid-19, but even to address a specific client need, is key to our offering,” he says. “It has the agility for the entire team to gather to solve a problem and implement the solution quickly.”

According to Sansbury, the firm grew in excess of 20% last year in terms of both revenue and client numbers, even in the midst of market volatility created by extreme oil price fluctuations and the impacts of Covid-19. It was Aegis’s busiest trading year ever with its clients’ total net positive settlements registering more than $6 billion. Sansbury adds: “We help our clients hedge for rainy days, and last year proved the importance of that.”