Analysis: Commodity funds on track for big launch year in uncertain market

Tue Aug 6, 2013 5:50pm EDT
 
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By Barani Krishnan

NEW YORK (Reuters) - An ex-Glencore GLEN.L oil trader and a veteran grains merchant are among those behind the largest number of commodity fund launches in 3 years despite investor worries the multi-year rally in those markets is over.

A dozen hedge funds trading raw materials derivatives on discretion were launched in the first six months of this year, the same as in the whole of 2012, data from London-based research house Preqin showed. In 2011, only seven of such funds took off, the smallest number in 5 years.

The new funds are led by managers who are convinced they can be outliers in one of the toughest commodity markets in years. The funds typically begin trading with a few million dollars of the managers' own money and cash from family and friends, before seeking outside capital.

The launches coincide with talk the commodities "supercycle" of the past decade has been thwarted by the slowing of China's phenomenal growth. That has added to the caution of investors who had less concern allocating to hedge funds when oil, metals and grains prices were hitting record highs a few years back.

"There's certainly a mismatch now, with commodity managers seeing opportunities and investors remaining wary," said Amy Bensted, spokesperson at Preqin, which collects data on the alternative assets industry.

Braving this market is former Glencore oil trader Jonathan Goldberg, who previously traded grains and metals for Goldman Sachs GS.N. He hopes to raise $100 million for his New York-based fund BBL Commodities, sources briefed on his plan said.

Goldberg is meeting potential investors to accept a minimum of $1 million from each, the sources said. Goldberg, who will trade price spreads between different crude and petroleum products, did not return an email seeking comment.

Ron Anderson, who traded grains for 25 years at New York's two-century-old Continental Grain Company, in January started a discretionary trading program at County Cork LLC that looks at price disparities in soybeans and soy products on the physical and futures markets.   Continued...