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Brenham Capital Management LP, an energy equities fund manager with about $800-million in assets under management, will shut after two years of losses, its founder said in a letter to investors on Friday.

The Dallas-based fund will be liquidated and investor capital will be returned at the end of the year, according to the letter which was reviewed by Reuters.

While oil prices rallied to near four-year highs in October, those gains have not extended to energy equities, hurting firms such as Brenham. The Russell 2000 Energy index is down more than 20 per cent this year after falling 17 per cent in 2017.

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That index, the fund’s closest benchmark, has lost more than 60 per cent since the fund’s inception in 2012. Brenham Capital founder John Labanowski said in the letter that the firm’s net long investment strategy was no longer working, even as oil prices surged to four-year highs by October. The fund held positions in small and midcap shale companies including Oasis Petroleum and WPX Energy Inc, according to regulatory filings.

Labanowski also said he was “tripped up by inconsistent OPEC policy.” The Organization of the Petroleum Exporting Countries decided, with other top producers, to cut production in late 2016, but its lead member, Saudi Arabia, reversed course this year, with production hitting record highs.

“This ‘make it up as you go’ policy from the world’s oil cartel created a new set of risks and made it difficult to invest in the sector with a longer-term time frame,” Labanowski said.

The fund was down 10.5 per cent in 2017 and down 14.7 per cent in 2018 through October, said Dawn Blankenship, a director at the firm.

“I’ve been bullish energy stocks since 2016 and this constructive posture just hasn’t paid off over the last two years,” Labanowski wrote.

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