Liongate Seeks $500 Million for Commodity Fund of Hedge Funds

Date: Monday, March 2, 2009
Author: Chanyaporn Chanjaroen

Liongate Capital Management LLP, a London-based firm managing $2.2 billion, plans to raise $500 million for a fund of commodity hedge funds.

The Liongate Commodities Fund returned about 0.1 percent last year and 0.3 percent in January, when it operated with the firm’s capital of $40 million, the company said in a statement and a presentation. The Reuters/Jefferies CRB Index tracking 19 commodities lost 39 percent in the 13 months through Jan. 30.

“It’s an inauspicious time to invest in commodities,” said Tim Price, director of investments at London-based PFP Wealth Management, a financial adviser. “In the longer term, a shift to an inflation bias from the current deflation would represent a huge opportunity.”

Assets under management in commodity and natural-resources funds advanced 9.5 percent to about $34.1 billion, said Brad Durham, managing director of Cambridge, Massachusetts-based EPFR Global, a research company monitoring funds. They peaked at $68.8 billion in May.

Liongate favors funds using active managers rather than computer-generated trading.

“We prefer funds such as Louis Dreyfus Commodities Alpha that are directly involved in the industry’s supply and demand,” Adam Taylor, the lead analyst on the Liongate Commodities Fund, said in an interview Feb. 26.

Louis Dreyfus Group, the commodity trading company founded in 1851, started the LD Commodities Alpha Fund in November. The $120 million fund, led by Geneva-based Ian Mcintosh, trades agricultural contracts and returned about 2 percent this year, according to two investors in the fund. Carine Dauphin, a spokeswoman for Louis Dreyfus, declined to comment.

Agriculture, Metals

In February, Liongate allocated 29 percent of its assets to energy, 28 percent to agriculture, 17 percent to base metals and 14 percent to precious metals, according to the statement.

The plunge in commodity prices in the last several months doesn’t change the outlook for demand, which will strengthen as Asian nations industrialize and people move to cities, Liongate said in the presentation.

Randall Dillard and Jeff Holland founded Liongate in 2003. The company’s flagship Multi-Strategy Fund has returned more than 11 percent a year on average since it started in April 2004.

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.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net