The $2 billion commodity hedge fund of Louis Dreyfus Group, the world’s largest rice and cotton trader, stopped accepting new money from investors, according to two people, after assets advanced 20-fold in about two years.
The Louis Dreyfus Commodities Alpha Fund, managed by Geneva-based Ian McIntosh, started with $100 million in November 2008 and focuses mainly on farm products including grains, oilseeds, sugar, coffee and cocoa. The fund returned 17.3 percent in 2010, according to the people who have direct knowledge of the matter. They declined to be identified because the information isn’t public.
Investors increased their allocation to commodities as cotton and rubber soared to records, and coffee more than doubled in the past year, after drought and floods ruined crops. Commodities-related funds attracted $5 billion in the fourth quarter, the biggest such inflow since the period ended June 30, 2009, said Farhan Mumtaz, an analyst at Eurekahedge Pte.
“Physical commodity market knowledge assists in more accurate supply and demand analysis” for hedge funds trading raw materials, said Adam Taylor, assistant portfolio manager at London-based Liongate Capital Management LP, which invests more than $500 million in such funds.
The Louis Dreyfus Group, founded about 160 years ago, trades grains, oilseeds, sugar, ethanol, coffee and cotton, and has offices in more than 55 countries, its website said. The company has expanded into energy, real estate and electricity distribution in France. McIntosh, 49, has been with Louis Dreyfus since 1984. The fund also trades metals and freight.
Fund Returns
Commodity hedge funds returned on average 10.65 percent in 2010, the Newedge Commodity Trading Index shows. Investors in the Standard & Poor’s GSCI Commodity Index received 9.02 percent.
Assets managed by commodity-related funds were $195.8 billion as of Dec. 31, Eurekahedge’s Mumtaz said in Singapore.
Cotton jumped to a record $2.0893 a pound on ICE Futures U.S. on Feb. 18 and more than doubled in the past 12 months on demand from China and as floods destroyed crops in Australia and Pakistan. Rubber surged to an all-time high of 535.7 yen per kilogram the same day after floods in Thailand disrupted output.
Hedge funds are largely unregulated investment vehicles whose managers can trade any asset, aim to make money regardless of whether markets rise or fall and participate substantially in profits from money invested.
