Trafigura Says It's Winding Down Flagship Commodity Hedge Fundby and
Galena Metals Fund shut down due to to "difficult" markets
Trafigura said it will retain other Galena managed funds
Commodities trader Trafigura Pte Ltd. said it is closing its flagship Galena Metals Fund, the latest hedge fund victim of the rout in raw materials markets from oil to copper.
Commodities hedge funds are heading for their worst year since the 2008-09 global financial crisis, with some shutting down -- including the $450 million Armajaro Commodities Fund -- after losing money and clients.
"In view of the difficult conditions prevailing on commodities markets, Galena Asset Management has decided to wind down the Galena Metals Fund," Trafigura said in a statement on Monday. "Investors have been informed and trading positions are being unwound in an orderly manner.”
Galena is one of the best-known hedge funds investing in metals, particularly copper, alongside rivals Red Kite Group and Citrine Asset Management LLC. Copper prices fell this month to a six-year low below $4,500 per metric ton. The LMEX Index, which tracks the price of aluminum, copper, nickel, zinc, lead and tin, has lost half its value since setting a record in 2007.
The $300 million Galena Metal Fund dropped 4.5 percent this year, heading for its first annual loss since 2012, according to data compiled by Bloomberg. The fund, which was more than twice its current size five years ago, had made money in nine out of 10 years since it was started in 2005.
The closure comes days after Trafigura said that Duncan Letchford, chief executive officer of Galena, was leaving the company to pursue other interests. The trading house, which has major operations in Geneva and Singapore, said it will retain other funds, including its private equity fund focused on debt and equity of mining companies.
Galena had assets under management of $2.2 billion as of September 2014, according to Trafigura’s annual report. The trading house will update the market on its hedge funds when it releases its results later this month.
Trafigura joins other trading houses restructuring their hedge fund businesses. Cargill Inc., a major trader of agriculture commodities, said in September it would spin off its $7 billion hedge fund unit Black River Asset Management. The separation came two months after Black River shut down four funds investing in equities, emerging markets, commodities and a regional fund focused on Europe, Africa and the Middle East.
Krom River Trading AG, a commodities hedge fund based in Switzerland, told investors earlier this year it would re-launch after its assets under management fell to $64 million in June, down from about $800 million in 2012.
Hedge funds betting on commodities are heading for their worst performance in seven years, after losing 4.6 percent in the first 10 months of 2015, according to the Newedge Commodity Trading Index. The amount of money under management by hedge funds specializing in commodities stands at $24 billion, 15 percent below the peak three years ago, data from Hedge Fund Research Ltd. show.