Ospraie's Anderson Sees `Miserable' Future for Metals and Oil

  • Hedge-fund founder sees aluminum closures and bankruptcies
  • Anderson says oil will remain in surplus for 3-6 months

The founder of what was once the world’s largest commodity hedge fund sees little reason for short-term optimism about oil and industrial metals.

“Aluminum is miserable and is going to stay miserable and will have to force closures and bankruptcies,” Dwight Anderson, founder of hedge fund Ospraie Management, said Tuesday in a “Bloomberg <GO>” television interview with Stephanie Ruhle and David Westin. “In general, for most industrial metals, we have a negative outlook for the near term.”

Oil, meanwhile, will remain in surplus for the next three to nine months, with stockpiles expected to peak sometime in the second quarter, he said. The comments come as the U.S. crude benchmark futures contract heads for its second year of losses, the first consecutive declines since 1998, and  as the index that tracks the six primary metals traded on the London Metal Exchange hovers near a six-year low. The Bloomberg Commodity Index, which tracks returns from 22 different commodities, in August touched the lowest level since 1999.

Ospraie shut its biggest fund seven years ago after a substantial sell-off in energy, mining and resource equities caused it to drop 27 percent in a month. Anderson, 48, then apologized to investors in the fund, valued at $2.8 billion a month earlier, for not being a “good steward of your capital.”

Gem Value

Ospraie managed about $800 million as of May. Anderson said Tuesday he sees value in diamond producers such as Dominion Diamond Corp. and Mountain Province Diamonds Inc.

Anderson started his hedge-fund career working for billionaire Julian Robertson at Tiger Management and later worked at Tudor Investment Corp. before spinning off his own fund, named after the marine bird of prey, in 2003.

Despite his bearish outlook on the sector, Ospraie is backing a new metals trading business run by ex-Noble Group Ltd. employees, people familiar with the matter said this month. The new company, called Concord Resources Ltd., will focus on non-ferrous metals such as aluminum, zinc, copper, nickel and lead, and Anderson will be the chairman.

Former Noble traders Scott Evans and David Freeland will oversee operations for the Americas and Europe and the Middle East and Africa, respectively.

Anderson said investors would have been better buying debt instead of shares in commodity company Glencore Plc.

“It’s not the trading business, it’s -- you buy a range of quality of assets with a bunch of debt and that makes you vulnerable to the cycle,” Anderson said.

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