Former JPMorgan Chase & Co. trader Damien Bombell, who left when the bank closed a unit that bet on commodities last year, started a hedge fund to invest in metals, grains and energy.
The Strand Global Macro Fund began investing this year with money provided by Bombell and his partners, he said in a telephone interview. The fund plans to start trading with capital from outside clients in January, and is seeking to have at least $200 million under management, he said.
“The reason why people should invest in strategies like mine is that we are not in an investing environment anymore,” he said in an Oct. 7 interview. “For the next five to 10 years, we are likely to be in a very disjointed market place, where politicians lurch from one crisis to another. You need tactical traders and people who are mentally flexible.”
Bombell, 39, left JPMorgan in November 2010 after the New York-based company told him and other members of the commodities proprietary trading desk it would shut down the unit to comply with U.S. rules that prevent banks from using their own money to wager on markets. He joins traders from firms including Goldman Sachs Group Inc., Citigroup Inc. and Morgan Stanley who’ve left to join or start hedge funds after the Volcker rule restricted risk-taking by banks following the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos. in 2008.
20% Return Target
Hedge-fund startups had the most active first six months of the year since before the financial crisis, helped by investors seeking higher returns as central banks hold interest rates near record lows. Money managers founded 578 new hedge funds during the first six months of 2011, the most since the first half of 2007, according to Chicago-based Hedge Fund Research Inc.
The Strand fund will try to produce annual returns of 15 percent to 20 percent, said Bombell, who serves as chief investment officer of Zug, Switzerland-based Strand Asset Management AG.
Hedge funds are private pools of capital whose managers can buy or sell assets and bet on falling as well as rising prices. The Strand fund, like many of its peers, will charge clients 2 percent of assets under management to cover costs plus 20 percent of any profits.
Commodity prices as measured by the Standard & Poor’s GSCI Spot Index of raw materials gained 5.2 percent last week, erasing losses for the year. The increase, the biggest weekly jump since December, came after investors gained confidence that European policy makers would take steps to bolster the region’s banks. Oil and copper declined in August and September on concern that Europe’s debt crisis would hurt demand for commodities by spurring a global recession.
Bombell, who was born in Sydney, said the Strand fund is buying Arabica coffee based on his view that demand will outstrip supply. He’s also becoming “quite bullish” on Brent crude oil, predicting a “nasty situation” in which it could rise to $150 a barrel from about $110.
“That would ensure a global recession in 2012, regardless of the fix being found for euro zone banking and sovereign problems,” said Bombell.