The Rise and Fall of Commodities Hedge Fund King Willem Kooykerby
Flagship fund has been down in four of the last five years
Assets under management have fallen nearly 85% to $1.5 billion
Thirty miles west of Wall Street, in an anonymous office park set among rolling hills and shady streets, lurks a giant of the commodities world.
Behind the bland facade in Berkeley Heights, New Jersey, lies the headquarters of Willem Kooyker, one of the most powerful and enigmatic traders in the game.
For half a century, Kooyker has quietly ridden the ups and downs of oil, copper, cocoa and more, first in his native Holland and later at Commodities Corp., the legendary trading-company-cum-think-tank that served as a training ground for market wizards Paul Tudor Jones, Louis Bacon and Bruce Kovner.
Only now, at 73, Kooyker is struggling to contain the damage from a commodities collapse that even he never saw coming.
Before the worst hit -- $20-a-barrel oil no longer sounds so crazy -- Kooyker’s hedge-fund firm was already hemorrhaging billions in assets, people close to his operation say. With returns at Blenheim Capital Management LLC’s flagship fund down for four out of the past five years, some investors are heading for the exits.
The numbers tell the story. At its height in 2011, Blenheim was the world’s largest commodities-focused hedge fund, with $9.1 billion in assets, people familiar with the firm say. Today, its assets have fallen nearly 85 percent to $1.5 billion.
What went wrong? The short answer is that Kooyker didn’t think things would get this bad. He and his colleagues underestimated the economic troubles in China and never thought commodities prices would fall so far, so fast, the people said, speaking on the condition they not be named to avoid jeopardizing business relationships.
It’s a remarkable turnabout for Kooyker, whose tenure atop Commodities Corp. in the 1980s set the stage for two wildly lucrative decades at Blenheim. In 1999, for instance, as oil sank below $10 a barrel, Kooyker bet that commodities would bounce back -- and his hedge fund soared nearly 109 percent. Billions of investor dollars poured in.
Few outsiders had any idea what Kooyker was up to. Most still don’t. He’s long operated under the radar, arguing that any publicity, good or bad, only hurts investment returns.
“They are the most secretive I have ever met," Christoph Eibl, chief executive officer of the $800 million commodity investor Tiberius Asset Management AG, said of Blenheim.
Kooyker and others at Blenheim declined to comment on the fund’s recent performance, assets under management or trading strategy.
The question now is how Kooyker can recover from a rout that has shaken investors, corporations and entire economies. Already, Blenheim investors like the $21 billion New Zealand public pension fund have pulled money out, according to annual reports from the Kiwi fund and interviews with people familiar with the matter.
Granted, many other commodities specialists are suffering too. Cargill Inc., the agricultural giant, has shut one of its funds. Trafigura Group Pte, the oil and metals trading house, has closed its flagship Galena Metals Fund. Trafigura estimates that the world’s 10 top commodities hedge funds now manage $10 billion altogether, a fifth of what they did in 2008.
No one would mistake Kooyker for one of the rough-and-tumble traders who used to rule commodities from the trading pits of New York and Chicago. Tall and stately, with a shock of gray hair, an aquiline nose and deep blue eyes behind rimless glasses, he cuts an elegant figure on the New York social and philanthropic circuits. He has donated millions to the Metropolitan Opera, where his wife, Judith-Ann Corrente, is president of the board, and is a leading donor to Democratic political candidates.
An admirer of Winston Churchill, he named his firm after Blenheim Palace, Churchill’s birthplace and ancestral home in Oxfordshire. Busts of the British statesman adorn Blenheim offices. Kooyker tends to work out of one on Fifth Avenue in Midtown Manhattan; his London offices overlook Her Majesty’s Treasury, beneath which lie Churchill’s famed Cabinet War Rooms.
Kooyker has come a long way since he began his trading career, in 1964, at Internatio-Muller in Rotterdam. Eventually he rose to become head of the trading group there. In 1981, jumped to Commodities Corp., in Princeton, New Jersey, where the Nobel Prize-winning economist Paul Samuelson and a small band of erudite traders were sifting through mounds of data on every commodity from aluminum to zinc -- and making a fortune in the markets.
According to biographical details filed at the U.S. Securities and Exchange Commission, Kooyker became president but then left to establish a joint-venture between Commodities Corp. and a group of Middle Eastern investors -- a potentially valuable connection for any trader.
In 1989, Kooyker formally struck out his own, according to letters that Blenheim has sent to investors. But, by its own count, Blenheim’s track record predates 1989, going back to the days of his Commodities Corp. joint venture, Tricon Holdings Co. And what returns they were: 54.7 percent in 1987; 19.6 percent in 1988; 108.5 percent in 1989; 12.6 percent in 1990, according to Blenheim documents reviewed by Bloomberg.
By 1997, when Commodities Corp. was acquired by Goldman Sachs Group Inc., Kooyker had far eclipsed his old colleagues down in Princeton. Within commodities circles, he’d become a star.
It’s easy to see why. Until its recent rough patch, Blenheim had posted an annual loss only five times in 30 years. Twice, it returned more than 100 percent, and a dozen times at least 20 percent, according Blenheim investor presentations, letters to clients and interviews with people familiar with the fund.
Those lofty returns enabled Kooyker to charge unusually high fees. While most hedge funds charge "2 and 20" -- an annual management fee equal to 2 percent of assets, plus 20 percent on any profits -- Kooyker charges 2.25 and 25, according to Blenheim investor letters and presentations.
Then the financial crisis hit and some of the old magic began to fade. Blenheim lost money in 2008, bounced back in 2009 and 2010 -- and then sank 23.5 percent in 2011, one of its worst years ever. More red ink flowed in 2012 and 2013. After a slight rebound in 2014, the fund lost about 10 percent last year.
The difficult run is particularly notable because Kooyker has been known for rigorous risk management since his days at Commodities Corp. If one of his portfolio managers runs up a 10 percent loss, higher-ups demand to know why. If a loss reaches 20 percent, managers are forced to sell positions and take month-long leaves. If they do even worse than that, they’re usually shown the door.
People familiar with Blenheim say that, in retrospect, the firm’s assets grew so quickly during the early 2000s that Kooyker had trouble spotting money-making opportunities. NEPC LLC, which advises pension funds about where to invest, also pointed to some problems.
Blenheim "in some instances has been premature in executing that strategy which later turned out to be correct," NEPC said in a presentation to funds owned by the University of Maine endowment in March 2014. "Blenheim lost money as the market sold off and also reduced risk significantly, which meant that, in risk-on periods, it didn’t participate sufficiently on the upside."
The consulting firm this month recommended the University of Maine terminate its investment in Blenheim. If the firm’s assets dropped below $1 billion, the fund "will have to reconsider its structure," it said in a January presentation.
Today, 50-odd employees help Kooyker run several funds, including the flagship Blenheim Global Markets Fund. Kooyker, who historically managed about 75 percent of the assets, now runs as little as 15 percent, according to this month’s presentation by NEPC for the University of Maine funds. It said "this may signal a move towards his retirement."
His long-time lieutenant and numbers whiz, Thomas Kopczynski, remains a key trader, according to people familiar with the structure. Gerlof de Vrij, the chief investment officer, joined in 2012 from the Dutch pension system APG. Kooyker’s son, Terence, also works there.
As Kooyker’s troubles have multiplied, several Blenheim traders have left. The question now is whether more investors will depart too. So far, Willem Kookyer is heeding Churchill’s advice: never give in.