Why is everyone surprised?
When even Cargill Inc., the world’s largest grain trader, decides to liquidate its own hedge fund, that’s a sign that commodity speculators are in trouble.
Hedge funds focused on raw materials lost money on average in the first half, the Newedge Commodity Trading Index shows. Diminishing investor demand spurred Cargill’s Black River Asset Management unit to shut its commodities fund last month. Others enduring redemptions include Armajaro Asset Management LLP, which closed one of its funds, Carlyle Group LP’s Vermillion Asset Management and Krom River Trading AG.
While hedge funds are designed to make money in both bull and bear markets, managers have a bias toward wagering on rising prices and that’s left them vulnerable in this year’s slump, said Donald Steinbrugge, managing partner of Agecroft Partners LLC. The Bloomberg Commodity Index tumbled 29 percent in the past year and 18 of its 22 components are in a bear market.
“No one wants to catch a falling knife, and demand for commodity-oriented hedge funds is very low,” said Steinbrugge, whose company helps funds find investors.
More here – Bloomberg