LONDON (Reuters) Hedge funds owned by commodity giants including Cargill and Louis Dreyfus have outwitted their standalone rivals in a year of market volatility that has disrupted traditional models for oil and metals trading.
They have used their knowledge of agricultural markets to trade products that have been less affected http://www.oakleysunglasses2u.net/ by central bank liquidity injections or heightened tensions in the Middle East as many other funds have had their worst year in a decade.
The $2.4 billion Louis Dreyfus Commodities Alpha Fund, owned by the eponymous 161 year old French trader, has returned around 7 percent to end November. The leveraged version is up about 15 percent, one source who has seen the numbers said. trading behemoth Cargill, has returned 9.2 percent to the end November in its Commodity Trading Fund, one source said.
“These large houses have a pretty good understanding of the agriculturals markets and these markets were really driven this year by fundamental reasons, supply demand issues, and not by the macro environment, the risk on, risk off trades,” Gabriel Garcin, a portfolio manager at Europanel Research Alternative Asset Management in Paris, said.
By contrast, the average commodity fund is heading for its worst year in more than a decade and is down 3.08 percent to end November, according to an estimate of the Newedge Commodity Trading Index Trading, one of the most widely watched. into recession confounded the models of many managers trading oil and metals.
“This year has been very disappointing, with flat and choppy trading,” said Fabio Cortes, head of Macro and Commodities at hedge fund investor Oakley Alternative Investment Management.
Among the more prominent funds facing losses are Chris Levett’s oil focused Clive Capital, down 7.8 percent, and Michael Coleman’s Cheap Oakley Sunglasses Merchant Commodity Fund, down 9.06 percent, both to November 23, investors in the funds said.
Geneva based Galena, which runs $2.2 billion in assets, boasts of an “informational edge” thanks to access to Trafigura’s insight into global supply and demand dynamics. Galena made 3.65 percent in its Energy Fund in the first 11 months of cheap oakleys the year.
Others have looked to former employees at trading giants to launch new funds.
The $1 billion fund is up 1.2 percent to end November, an investor letter shows, making back some of last year’s losses.
Across the sector as a whole, commodity hedge funds have less to shout about. Losses this year come on top of a fall in 2011 a far cry from the annualised 25 percent of 2000 2007.
Frustrated investors have also pulled money from poor performers, including Singapore based Merchant.
Part of the problem for traders has been a struggle to understand the impact of central bank quantitative easing on metals prices. Even as slowing economic growth hit the prices of some, the printing presses were propelling others higher.
“At the moment it is very hard to break the macro apart from the commodity. Commodity prices are increasingly dependent on decisions being made by elected politicians or unelected committees,” Christopher Brodie, manager of the Krom River Commodity Fund, wrote in his latest monthly letter to clients.
Brodie, whose $730 million fund is down 4.07 percent to end November, cited gold and silver as an example. If governments print more money via QE, precious metal prices should rise, he wrote.
But if at the same time they make progress in cutting budget deficits reducing the need for more QE prices should fall. The mixed impact makes it difficult to predict trajectories.
And QE related events affect more than just precious metals.
“Managers didn’t understand the impact of quantitative easing on commodity prices in the second half of this year,” Cortes said, referring to a QE stoked rally in base metal prices even as iron ore fell on signs Chinese demand was stalling.
Three month copper on the London Stock Exchange has risen almost 10 percent since June to around $8,000 a tonne, while the iron ore benchmark 62 percent grade fell from $137 in June to $86 in September. It has since recovered to $132.
FISCAL CLIFF
Funds trading a whipsawing oil price also struggled. Heightened worries about the fiscal cliff weighed on prices just as Iran’s nuclear program and violence in Syria supported prices, making for volatile trading.