Taylor, Jamison Outpace Commodity Hedge Funds Seeing Losses
Commodity hedge funds run by George “Beau” Taylor and Stephen Jamison are posting gains this year as peers lose money and investors.
The $860 million Taylor Woods Masters Fund advanced 18 percent from January through October, heading for the best year since the February 2011 debut, according to a letter to clients obtained by Bloomberg News. Jamison’s $1.5 billion Koppenberg Macro Commodity Fund Ltd. rose about 6 percent in the period, according to two people with direct knowledge of the matter.
Commodity hedge funds on average lost 3.5 percent in the first 10 months, while their assets dropped 10 percent to $76.6 billion as of Sept. 30 from February 2012 as raw material prices head for the first annual loss in five years, according to eVestment, which tracks 467 such funds. The group is the worst performer within the industry this year after hedge funds targeting India, said Peter Laurelli, vice president for research at the Atlanta-based researcher.
“There have been many strong moves in commodity markets this year making it a surprise that funds targeting the segment appear less than capable of capitalizing on them,” Laurelli said. Many of the funds were hit by a “sharp decline” in crude oil in October, he said.
About 313 funds investing in commodities have closed down since the beginning of 2012 through this year to date, compared with 500 of them that started in the period, according to data compiled by Eurekahedge Pte.
“The continued lackluster performance in 2013 as compared to other strategies and the falling prices of commodities this year would also weigh in on investors when considering their allocation,” said Farhan Mumtaz, an analyst at the Singapore-based data provider.
Commodities as gauged by the S&P GSCI Index of 24 commodity futures is heading for the first annual loss since 2008 this year, as corn retreated more than 38 percent, gold futures slumped 26 percent and Brent crude fell 1 percent. The index has fallen 3.8 percent so far this year. Energy, metals and grains dropped on signs of ample supplies and amid speculation that the U.S. Federal Reserve will scale back stimulus.
West Texas Intermediate crude lost 5.8 percent last month when the discount to Brent widened to as much as $13.09 a barrel from less than $6 at the beginning of October. Rising inventories at Cushing, Oklahoma, depressed the New York-listed benchmark. The Taylor Woods fund made money on its energy investments, which accounted for about 83 percent of assets in October, according to the letter to clients.
Taylor, who turns 43 this month, co-founded the fund with Trevor Woods, his former colleague from Credit Suisse Group AG’s global commodities team. The fund lost almost 5 percent in 2011, and another 2.3 percent in 2012, according to the letter. Assets exceeded $1 billion last year, according to a previous letter. Blackstone Group LP, the world’s largest private-equity firm, provided $150 million in initial capital to the fund.
Chief Operating Officer Bob Flicker at Greenwich, Connecticut-based Taylor Woods Capital Management LLC declined to comment on the latest performance.
Koppenberg, based in New York and named after a steep hill in Belgium that is part of the Tour of Flanders cycling race, advanced 2.7 percent in 2012, 8.15 percent in 2011 and 18.5 percent in 2010, according to the two people. It lost 7.6 percent from April to December 2009, the first trading year, the people said.
Jamison, who spent 13 years with Morgan Stanley before setting up the fund, declined to comment on the performance.
Some funds benefited from their investments in industrial metals including copper.
Red Kite Group’s $280 million metals fund returned 30 percent to investors in the first 10 months while the $500 million Compass fund made 12 percent, according to a person with direct knowledge of the matter. The Red Kite Prospect fund, which manages $115 million, advanced 16 percent during the period, the person said. The group had more than $2.3 billion under management as of Aug. 31, according to its website. Michael Farmer and David Lilley, both based in London, are co-founders of the group.
Red Kite made profits in the year when copper futures are poised to lose 11 percent, aluminum 14 percent and nickel 21 percent on the London Metal Exchange. Chief Financial Officer Paul Coughlan declined to comment.
Commodities tracked by the S&P GSCI Index rallied every year starting 2002 through last except in 2008, the period during which crude prices more than quadrupled, copper increased fivefold and gold’s value grew six times.
The “super-cycle” in commodity markets is over as demand from developing nations has declined and supply has increased, said Glenn Dubin, chairman of New York-based Highbridge Capital Management LLC, which manages $29 billion in assets and is owned by JPMorgan Chase & Co.
Prices have settled into a trading range after “hyperbolic” market moves, Dubin said in an interview with Bloomberg Television. Small investors aren’t investing significantly in commodities, he said.
Not all commodity funds made money in October as crude prices slumped. The $300-million energy-focused fund managed by Pierre Andurand declined 5.8 percent last month, paring February to October gains to 27 percent, according to two people with direct knowledge of the matter. Sara Corsaro, head of marketing and investor relations, declined to comment.
Frere Hall Capital Management LLP, a hedge-fund firm founded by former Goldman Sachs Group Inc. managing director Taimur Hassan that started trading in July 2012, declined 22 percent in October, according to a person with direct knowledge of the matter who asked not to be identified because the firm is private. The fund, which managed $646 million at the end of September, had gained 1.2 percent in the first nine months of 2013 after rising 9 percent last year, the person said.
Hassan didn’t return a phone call seeking comment on the fund’s performance. Chief Operating Officer Damian Dwan declined to comment.
Among the largest funds in the industry, Brevan Howard Asset Management LLP’s $880 million commodity hedge fund returned 1.8 percent in October, paring losses in the first 10 months to 3.3 percent, according to two people with direct knowledge of the matter. The fund, managed by Geneva-based Stephane Nicholas, started in 2010 with $200 million from the parent company. Nicholas declined to comment.
The $968 million Armajaro Commodities Fund, managed by London-based John Tilney, posted a 3 percent increase after a remaining unchanged in October, according to two people with direct knowledge of the numbers. An executive at Armajaro’s office in London declined to comment, asking not to be named in accordance with company policy.
“The managers who have done well have an understanding of financial derivatives, supply and demand analysis, and physical market knowledge,” said Gabriel Garcin, Paris-based fund manager at Europanel Research and Alternative Asset Management. “Most of the guys out there do not have the third one.”
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