Merchant, Clive Commodity Hedge Funds Quadruple Average Returns This Year

Michael Coleman and Doug King’s Merchant Commodity Fund and Chris Levett’s Clive Fund posted returns in the first 11 months that were more than four times average gains by hedge funds and outperformed index investments.

The $1.4 billion Merchant fund climbed 14.4 percent through November, according to a report obtained by Bloomberg News. Coleman confirmed its accuracy. Clive Capital LLP’s $4 billion fund advanced 11.3 percent, according to two people with direct knowledge of the matter. They declined to be identified because the numbers are private.

Hedge funds returned 2.8 percent on average from January to November, according to Chicago-based Hedge Fund Research Inc. The Coleman and Clive funds also beat the S&P GSCI Total Return Index, which dropped 0.3 percent, indicating losses for investors tracking the gauge of 24 commodities futures.

“Those who take a directional approach are doing quite well this year,” said Fraser McKenzie, head of research at 47 Degrees North Capital Management Ltd., based in Pfaeffikon, Switzerland. Money managers are “bullish” on raw materials and are placing bets that growth in China and the U.S. will mean more demand for metals and energy, he said.

The Merchant fund headed for its seventh consecutive annual advance. It lost 4.6 percent last month, the most since April, primarily because of agriculture, according to the report. King was head of global petroleum trading at Cargill Inc. while Coleman ran rubber trading.

‘Most Volatile’

November “was overall the most volatile month in commodities for over a year,” the fund said in the report. The Chinese government’s measures to tackle commodity-related inflation and Ireland’s sovereign-debt crisis prompted investors to avoid risks in commodity markets, the fund said.

Raw sugar lost 5.4 percent in November on ICE Futures in New York after peaking at 33.39 cents per pound on Nov. 11, the highest since 1981. Cotton futures climbed to record $1.5195 a pound on Nov. 10 and recorded a 6.3 percent decline in the month.

The Clive Fund gained 0.56 percent in November, according to the two people. It started in December 2007 and has advanced every year since then, investing in all commodities, currencies and interest rates. Levett, 40, founded the hedge fund after his departure from New York-based Moore Capital Management LLC.

The Thomson Reuters/Jefferies CRB Index of 19 raw materials advanced 0.3 percent last month, heading for a second consecutive year of increase. Cotton, silver and coffee led gains in the gauge this year. Copper and gold advanced to records this week.

Hedge funds are largely unregulated investment vehicles whose managers can trade any asset, aim to make money regardless of whether markets rise or fall and participate substantially in profits from money invested.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.