Plunging commodities prices claimed another victim on Monday as hedge fund Trafigura announced the the closure of its flagship Galena Metals Fund.
Commodities hedge funds have been hammered over the last few quarters, and are likely to suffer their worst year since the financial crisis. As clients and investment dollars have melted away, a number of commodities hedge funds have closed their doors over the last few months, including the $450 million Armajaro Commodities Fund.
Galena is one of the best-known metals hedge funds, especially for copper. Rivals to Galena include Red Kite Group and Citrine Asset Management.
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Of note, copper prices dropped to six-year low under $4,500 per metric ton earlier this month. The LMEX tracks the price of aluminum, copper, nickel, zinc, lead and tin, and has seen its value halved since hitting a top in late 2007.
More on closing of Galena Metals Fund
The now $300 million Galena Metal Fund is down 4.5% for the year, and barring a miracle, will suffer its first annual loss since 2012, based on Bloomberg data. The fund is less than half the size it was 12 months ago, had returned a profit in nine out of 10 years since its founding.
In related news, Trafigura announced last week that Duncan Letchford, the head of Galena, was resigning to pursue other interests. The announcement from Trafigura stated that it planned to keep its other hedge fund opens, including its private equity fund comprised of mining sector debt and equity.
Hedge fund firm Galena had an AUM of $2.2 billion as of September 2014, based on Trafigura’s latest annual report. The commodity trading firm will update its hedge funds with results at the end of the month.
Trafigura is just the latest trader to revamp their hedge fund businesses. Cargill Inc., a giant trader of agricultural commodities, announced a couple of months ago it planned to spin off its $7 billion hedge fund firm Black River Asset Management. The spin off announcement came shortly after Black River shut down four funds, including EM and commodities funds.
Krom River Trading, a Swiss commodities hedge fund, also announced a few months ago it was planning a relaunch following its AUM hitting $64 million this summer, down from a high of $800 million in mid-2012.
Newedge Commodity Trading Index data suggests that commodity hedge funds are heading for their worst performance in seven years, after dropping an average of 4.6% through the first 10 months of 2015.
Statement from Trafigura
“In view of the difficult conditions prevailing on commodities markets, Galena Asset Management has decided to wind down the Galena Metals Fund,” Trafigura noted in its statement Monday. “Investors have been informed and trading positions are being unwound in an orderly manner.”
Readers can view more from Trafigura here