Monday, October 23, 2006

Savvy investment managers doing well with commodities

A article reports that experienced hedge fund operators are doing well with their commodity-focused investment vehicles, despite a slump in the leading commodity indexes.

In, "Pickens, Farmer double their money during 2006 commodity rout", reporter Saijel Kishan describes how experienced fund managers are achieving postive returns at a time when the Goldman Sachs Commodity Index is down year-to-date.

Hedge fund returns are trouncing those offered by indexes of commodities, stocks and bonds. The Goldman Sachs Commodities Index, which the investment firm said in December would gain 9.5 percent this year, has lost 12 percent. The Dow Jones Industrial Average is up 12 percent, while 10-year Treasury notes have returned about 8 percent.

``Those that have worked for more than 10 years at the big commodity trading houses have seen it all before, they know how the markets work and how tricky they can be,'' said Jeremy Charlesworth, a director at London-based BDO Stoy Hayward Investment Management Ltd., which invests $40 million in commodity funds. ``Gray hairs are of great benefit.''

T. Boone Pickens and Michael Farmer (of the Red Kite fund) are among those highlighted for their fine performance, but not everyone came up winners.

Interesting to see mention of the fact that Ospraie Point Fund was liquidated in June after losing 29 percent on commodities related bets; Ospraie Management LLC head Dwight Anderson was recently highlighted as "The Commodities Specialist" in a chapter of Steven Drobny's recent book, Inside the House of Money.

Of course, the larger Ospraie Fund remains intact and it's quite possible that they will reorganize and introduce another commodities focused fund in the future. Crain's reported last month that Ospraie had, "jumped back into the commodities fray, hiring several key executives to manage two separate energy funds."