Commodity Hedge Funds Contract By 20%

Feb 7 2013 | 11:15am ET

Commodity hedge funds shrank by at least one-fifth last year, battered by poor performance and investors fleeing those bad returns.

The average commodity hedge fund lost about 3.7% last year, according to the Newedge index. In addition, the sector suffered its largest redemptions since the early 2000s, the Financial Times reports, with withdrawals nearing a net $5 billion.

All told, it left the commodity hedge fund world 20% smaller than it was at the beginning of last year, with a number of prominent funds, including BlueGold Capital Management, Centaurus Capital and Fortress Investment Group's commodities fund, shutting up shop altogether.

The news was not all bad, as some new and smaller hedge funds took in cash last year.

"What we are seeing is a significant reallocation of capital within the commodities space," Osvaldo Canavosio, head of commodities research at the Man Group's FRM fund of hedge funds business, told the FT. That has led to "some meaningful reductions in some funds and some significant increases in others," he said.


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