Aug. 22 (Bloomberg) -- Crude oil may tumble to $80 a barrel within 12 months as supplies of alternative energy increase, while grain prices may climb on emerging-market demand, said Renee Haugerud, whose hedge fund gained 18 percent this year.

The surge in oil has been ``overdone'' by investors seeking holdings in raw materials through the Standard & Poor's GSCI Index, a commodity gauge weighted toward energy, she said. Industrial metals also rose too high, she said.

``They were the sexy commodities,'' Haugerud, founder of the $2.5 billion commodities hedge-fund firm Galtere Ltd., said in an Aug. 19 interview in her New York office. ``Everyone wanted to get long an asset class via the GSCI, and let's face it, the GSCI is crude.''

Grains including corn and wheat may double as wealthier populations in nations such as Brazil and Russia eat more meat, boosting demand for livestock feed, Haugerud said. New energy sources such as solar power and ethanol will stall a recovery in oil prices, she said.

Haugerud's flagship fund has surged almost fivefold since starting in 1999. The long-term performance and this year's return were outlined in a letter sent to an investor. She declined to comment on her fund's returns.

Oil has slumped 22 percent from a record $147.27 on July 11. Futures for October delivery tumbled $6.59 to $114.59 today on the New York Mercantile Exchange. The 5.9 percent drop was the most since December 2004.

Energy prices account for 74 percent of the S&P GSCI Index, with crude oil making up 38 percent of the gauge.

`Hard Assets'

Price swings, or volatility, in commodities will continue as investors increase demand for ``hard assets'' as a store of value amid slumping financial markets and negative real-interest rates, Haugerud said.

``Commodities as an asset class are like an emerging market that comes in and out of favor,'' she said. ``It's exciting.''

Haugerud began her career in 1981 trading commodities at Cargill Inc., the largest U.S. agriculture company, and later worked at NatWest Markets, a unit of U.K.-based National Westminster Bank.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

They have dropped an average of 3.5 percent this year, according to Chicago-based Hedge Fund Research Inc.'s Global Hedge Fund Index.

The U.S. economy, wallowing in the worst housing crisis since the Great Depression, may have entered a recession, she said. Growth in other countries will probably slow, she said.

`Epicenter of Disaster'

``We might be in a recession here and go into slower global growth in the rest of the world,'' Haugerud said. ``The U.S. financial system is the epicenter of disaster. It's heinous.''

North American banks, including Citigroup Inc. and Merrill Lynch & Co., lead overseas rivals with $252.9 billion in writedowns related to the subprime mortgage market, more than half the global total. The International Monetary Fund has forecast that global losses will total $1 trillion.

Gold may rise to $1,000 an ounce on investor demand for a haven should equity prices tumble, Haugerud said. The precious metal fell $5.50 to $833.50 today in New York and has dropped 19 percent from a record $1,033.90 on March 17.

The commodity surge that started in 2001 and sent prices of copper, corn, soybeans, wheat and gasoline to all-time highs this year may be only a third or halfway through, Haugerud said.

`Not Enough'

``There's too much money in the world, and there are not enough commodities,'' she said.

The Reuters/Jefferies CRB Index of 19 raw materials has dropped 17 percent from the record on July 3 after posting the best first half in 35 years.

Copper may fall ``to the mid $2-a-pound range in the short term in a worst-case scenario,'' should the U.S. housing slump plunge the world's largest economy still deeper into recession, Haugerud said. The metal may be on an ``uptrend'' over the next decade, she said.

Copper futures for December delivery dropped 7.9 cents, or 2.2 percent, to $3.4595 on the Comex division of the Nymex. The price last touched $2.50 in February 2007.

U.S. natural gas is ``a buying opportunity'' at a range of $6 to $8 per million British thermal units, she said. Futures fell to $7.843 today, tumbling 43 percent from $13.694 on July 2. That had marked the highest since December 2005.

To contact the reporter on this story: Stewart Bailey in New York at sbailey7@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net.

Last Updated: August 22, 2008 15:39 EDT