Sunday, November 30, 2014

Europe's #2 Hedge Fund Firm to Close Commodity Fund

The thing I have trouble processing about hedge funds not being able to make money in falling commodity markets is the fact the wee beasties can be traded from either side.

It's almost enough to make one think the managers are nothing but closet trend-followers charging 2-and-20 for what's actually nothing but leveraged beta.
Or something.

From the Wall Street Journal:

Brevan Howard to Close Commodity Fund Due to Poor Performance
Fund, With $630 Million In Assets, Is Down 4.3% This Year 
Brevan Howard Asset Management LLP plans to close its commodity hedge fund following recent poor performance, according to two people familiar with the matter.

The fund, managed by Stephane Nicolas, has $630 million in assets. It lost 4.2% last year and is down 4.3% this year to the end of October, according to performance data reviewed by The Wall Street Journal.

It is not clear what Mr. Nicolas’s role might be following the commodity fund’s closure, a person familiar with the matter said. Attempts to reach Mr. Nicolas were unsuccessful.

Brevan Howard is among Europe’s largest hedge fund managers with about $37 billion in assets.

Brevan’s Macro fund, managed by billionaire Alan Howard , has about $26.5 billion in assets. The macro fund, which has never reported an annual loss, has faced headwinds this year, struggling to deliver a positive performance in the ultralow interest rate environment. The Wall Street Journal reported in August that the firm sharply cut risk levels in the macro fund during the first half of the year....MORE 
I've made the point a few times over the years, here's a couple from this year:

Sept. 2014 iteration:
"Falling commodity prices flash warning on widening global divergences"
The thing I don't get about some commodity "specialists" is why they can't make money in down markets.

I mean you can trade from either side but for some reason the mean-reverting nature of commodity prices seems to challenge some folks who really should know better....
July 2014 
"Goldman Forecasts Lower Commodity Prices as Super-Cycle Ends "
Following up on this morning's "Commodities: 'Goldman Thrives as Commods Rivals Melt Away' (GS)" and yesterday's "Charting the Roll-over in Commodity Prices".

Just as we expect bankruptcies among the mining companies to mark the bottom in gold we would expect front page human interest stories on the travails of the American farmer before the ags turn decisively.
CME corn 378'2 up 4'2 after a $3.71 bottom tick last night, NYMEX gold $1298.50 up $1.60. WTI popped back over $100, up 81 cents last.

Good thing you can take either side of the bet....
And many more.