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Touradji Hedge Fund Fell 9.4% in June as Commodities Rallied

Date: Thursday, July 10, 2008
Author: Saijel Kishan, Bloomberg

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Paul Touradji, the commodities trader who warned the market may collapse, posted a 9.4 percent loss in his main hedge fund last month as energy, food and metals prices rallied, said two investors with knowledge of the matter.

The decline left the $2.5 billion Global Resources Fund down 11.9 percent in the first half of the year, said the investors, who declined to be identified because the performance numbers are private. Touradji, whose New York-based Touradji Capital Management LP oversees $3.5 billion, declined to comment.

``Given that most commodity hedge funds did well in June, being down almost 10 percent sticks out like a sore thumb,'' said Chris Bouckley, chief investment officer at Caliburn Capital Partners LLP in London, which invests in hedge funds. ``However, investors are prepared for big losses and gains in commodities given how volatile the markets are.''

Commodities, as measured by the Reuters/Jefferies CRB Index, had the best first half in 35 years as oil and contracts tied to gold and corn rose to records. Touradji, 36, told clients in March that a ``buying orgy'' in commodities inflated prices and increased the risk of a collapse.

The Global Resources Fund invests in commodity futures as well as in shares of energy, mining and farming companies. Futures are contracts for delivery of a security at a specified time in the future at an agreed price.

Industry Woes

Touradji, who started his firm in 2005, has generated average annual returns of 21.4 percent. He previously co-founded Catequil Asset Management LP, a $1.6 billion hedge fund that shut down in 2004 after three years. He worked at Julian Robertson's Tiger Management LLC from 1996 to 2000.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

The industry turned in its worst first-half performance in almost two decades as the collapse of subprime-mortgage bonds and rising commodity prices pushed stocks into a bear market.

Hedge funds declined by an average 0.7 percent in June, bringing the year-to-date loss to 0.75 percent, data compiled by Hedge Fund Research Inc. show. It's the worst start to a year since the Chicago-based firm began tracking returns in 1990. The $1.9 trillion industry has posted one losing year, in 2002, when funds fell 1.45 percent amid the 23 percent decline by the Standard & Poor's 500 Index.

John Devaney is liquidating hedge funds at his Key Biscayne, Florida-based United Capital Markets Holdings Inc. after failing to meet a margin call from Deutsche Bank AG.

Deutsche Bank seized and auctioned off collateral after the Horizon group of funds failed to meet the bank's demands, according to a letter to clients obtained by Bloomberg News yesterday. The funds were frozen a year ago because of wrong-way bets on mortgage securities.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net