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Commodity hedge funds finding favour with investors again

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Big price swings and talk of a new supercycle have brought commodity hedge funds back into favour with investors after years of being largely ignored, according to a report by Bloomberg.

The report cites preliminary data from Bridge Alternative Investments as revealing that the top 15 commodity-focused hedge funds have increased their assets by 50% this year to a combined $20.7 billion. Some new players in the space have already closed to new investors, while big macro firms are on the look out for top talent as they boost their commodities teams.

The new breed of manager attracting investor interest are technically focused quant traders rather than the high profile, ‘big beasts’ who once dominated the space.

Quantix’s Commodities Alpha Fund with $1.7 billion and Pimco’s Commodity Alpha Fund with more than $2 billion, are two of the new breed which have attracted significant funds, while teh report cites unnamed sources as also identifying East Alpha and Star Capital as major players.

Some of the old guard are back in business though, with different companies, including metals veteran and Red Kite co-founder David Lilley whose new firm, Drakewood Capital Management, has closed its fund to new investors with assets above $1 billion and is working on a new fund that will include physical metals investments.

Another Red Kite alumnus Oskar Lewnowski’s Orion Commodities Fund LP, part of his wider Orion Group, has also seen new investment, with $1.6 billion under management at the end of October. Orion now reportedly manages about $7.8 billion – around twice as much as Red Kite managed at its peak in the early 2010s.

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