Ospraie Management will shutter its flagship hedge fund, which lost more than a quarter of its value last month on commodity stock bets.

Firm founder and portfolio manager Dwight Anderson delivered the bad news to investors in a letter yesterday. The fund, which boasted assets of $2.8 billion at the beginning of August, lost 27% during the month and was down more than 38% year-to-date. The year’s losses triggered a clause releasing the fund’s investors from their lock-up agreements, allowing them to redeem what is left of their investments early.

“Not only as a portfolio manager, but as one of the largest investors in the Ospraie Fund L.P., I have shared in the losses with you,” Anderson wrote in his mea culpa. “After nine years of striving to be a good steward of your capital, I am very sorry for this outcome.”

The letter detailed plans to return 40% of the fund’s assets to investors by the end of this month, with another 40% to come by the end of the year. The remaining 20% could be tied up in illiquid investments for as long as three years, Anderson wrote.

The huge losses came on investments in energy, mining and natural resources companies, making Ospraie the latest victim of the volatility and turmoil in the commodities markets. According to Securities and Exchange Commission filings, Ospraie Management owned such names as Alcoa Inc. (down 17% year-to-date) and Arch Coal (up 1.74%), though it is unclear which stocks were owned by the flagship.

New York-based Ospraie manages $4 billion outside of the Ospraie Fund.