Baobab Plans $500 Million Commodities Hedge Fund

Feb 2 2009 | 2:55am ET

In the wake of a brutal year for commodities hedge funds, another new offering is betting that better times must be ahead.

Baobab Asset Management plans to launch its Natural Resources Fund on March 1, Bloomberg News reports. Firm founder Russell Fryer, the former head of natural resources at Greenwich, Conn.-based hedge fund shop North Sound Capital, hopes to raise $500 million for the new vehicle. The fund will trade exchange-traded commodities, derivatives and equities of natural resource companies.

“I’m bullish on commodities,” Fryer, who left North Sound in December, told Bloomberg. The fund will focus on metals, oil and agriculture. In particular, Fryer said he is looking a mineral sands producers.

Commodity hedge funds took a beating last year, with half of their assets disappearing in between September and October. Commodities themselves suffered a historically bad year, with the Bloomberg Europe Metals & Mining Index falling 67%.

But the downtrodden state of the market is buoying new entrants to the market. A trio of AllianceBernstein veterans founded an energy-focused hedge fund, TS World Development Fund, in December, as did the new Singapore hedge fund shop, Four Elements Capital. Alternative investments giant Apollo Management last month announced its own plans for a suite of commodity-focused offerings, including a $500 million metals hedge fund.


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