In the past few months, we’ve discussed in some details hedge funds, what they are, how they work. And also commodities, how to invest in them easily (we’ve discussed gold, oil, etc). And with commodities being so volatile in the past couple of years, you would think the hedge funds investing in these would be making tons of money right?
Well, partially. Many funds have been having very volatile returns of their owns. For a while, commodities were usually going in only one direction, up… But as they start to have less of a clear direction, funds invested in them have had very volatile returns of their own.
One example that has been making headlines (partially because one of its big owners is Lehman Brothers (LEH) who already had enough issues of their own is the biggest hedge fund ran by Ospraie Management LLC. The fund has been closed after a dismal 39% loss this year!!
The Ospraie Fund lost 26.7 percent in August, after a “substantial sell-off in a number of our energy, mining and resource equity holdings,” Anderson, 41, wrote in the letter today.
“I am extremely disappointed with this result and the fund’s sudden reversal in performance,” he said. “After nine years of striving to be a good steward of your capital, I am very sorry for this outcome.”
Another good example was Amaranth, a fund ran by Canadian Brian Hunter that got into huge positions thanks to a 8 to 1 leverage on 9 billion dollars. And guess what…? They ended up losing 6.5$B out of the 9$B and closing their fund.
And guess what, Brian Hunter did not even have to wait long to get a new job as he joined Solengo Capital Advisors although the fund managers said they would keep him on a tight leach… yeah right. Read an interesting article about it here.
Of course, some other funds have been on the other side of these trades and been putting on great returns. But usually those funds try to stay out of the spotlight as such big fund are usually not looking for new investors..!
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