April 18 (Bloomberg) -- Clive Capital LLP, the $1.3 billion commodities hedge fund firm started by Chris Levett, gained 17.6 percent in the first quarter as energy and metals prices rose to records.

The London-based fund returned 3.5 percent before fees this month through April 11, according to a letter sent to investors and obtained by Bloomberg. Elizabeth Holstein, a spokeswoman for the fund, declined to comment.

Levett, 38, a former trader at Moore Capital Management LLC, profited as investors bought commodities to hedge against a decline in the dollar. As oil and corn rose in the quarter, hedge funds lost 2.8 percent on average, according to Hedge Fund Research Inc.'s HFRX Global Hedge Fund Index.

``The real test for commodity hedge funds will come when we see more downward corrections in the markets,'' said Toby Hayes, a money manager at London-based Insight Investment Management Ltd., which has 110 billion pounds ($218 billion) in assets. Insight isn't an investor in Clive Capital.

Clive Capital's advance beat the 14.3 percent return in the first quarter from the Astamax Commodity Index, the best- performing commodity index of those tracked by Bloomberg. Oil, wheat and gold climbed to record levels in the period.

The Standard & Poor's 500 Index fell 9.9 percent in the first quarter, while Treasuries returned 4.4 percent, according to Merrill Lynch & Co. indexes.

Levett started Clive Capital in December and posted a 3.4 percent return that month. His fund gained 5.3 percent in January, 15.5 percent in February and lost 3.3 percent last month.

Trading History

Levett left New York-based Moore Capital, the $15 billion hedge-fund firm run by Louis Bacon, in July after posting an 11 percent return in the first seven months of last year. Levett generated a 39 percent return from commodities in 2004, 47 percent in 2005 and 31 percent in 2006, according to Clive Capital marketing documents.

He previously ran 21st Century Management Ltd., a Monaco- based company founded in 1997. Before that, he worked for two years at trading firm Commodity Corp. Levett started in commodities in 1992 at American International Group Inc., where he traded oil.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested.

To contact the reporter on this story: Saijel Kishan in London at skishan@bloomberg.net

Last Updated: April 18, 2008 04:28 EDT