Ebullio Exits 'Impossible' Physical Metals Trading

Sep 4 2013 | 12:25pm ET

In the wake of a court-order to liquidate its Commodity Master Fund, Ebullio Capital Management is quitting the physical metals business.

The British-based hedge fund said it would exit physical metals trading, citing sharply lower profit margins and the difficulty of competing with the industry's largest players.

"It's a market that's been sewn up by banks and trade houses, and others can't operate," Ebullio founder Lars Steffensen told Reuters. "That's OK, that's business, but we can choose not to be in that business."

Steffensen said that the loss of bank financing has cut margins on a typical copper trade by 90%, from 80% per year to 8%, with warehousing prices cutting that to just 1% to 2%.

"Today, because of low interest rates and ownership of warehouses by banks and trade houses, it's become impossible to obtain metal in the spot market outside of warehouses—or you have to pay very high premiums, so it's prohibitive," Steffensen said. Global regulators are looking into whether banks are artificially boosting metal prices by hoarding commodities in their warehouses.

Ebullio has shifted to commodity futures trading. The firm manages US$250 million and its Far East Commodity Fund returned 16.46% last month.

Also in August, a Cayman Islands judge ordered the liquidation of Ebullio's former flagship, Commodity Master, to pay damages to Noble Group stemming from an alleged breach of contract. That fund, which lost 96% in the first two months of 2010, was to be shuttered anyway, Steffensen said.


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

The Trump Administration: What It Could Mean for Carried Interest

Jan 19 2017 | 5:25pm ET

The arrival of the Trump administration brings the potential for a repeal of the...

 

From the current issue of

Often seen as a passion project, or part of a philanthropic venture, rare and fine stringed instruments offer an exciting option to diversify one’s investment portfolio while providing an opportunity for an exceptional long-term investment.