Bloomberg- Investments in commodity hedge funds may rise to about $35 billion by year-end as more traders set up funds to take advantage of swings in prices for energy, metals and agriculture, according to Cole Asset Management.
About $30 billion is currently invested in the funds, which mainly trade commodity derivatives and shares of energy, mining and agricultural companies, said Brad Cole, founder of Chicago- based Cole Asset Management, which invests in such funds.
“We are seeing more and more people leaving the commodity- trading merchants to start their own hedge funds,” Cole said in an interview yesterday at a commodity seminar in London organized by the Chicago Board of Trade and Cole Asset Management. “Volatility in the markets is an attraction.”
Dunheath Capital Partners LLC, a Greenwich, Connecticut- based hedge fund founded by Greg Davidson, a former metals trader at Gerald Metals Inc., was due to start trading last month. London-based Primergy Capital Partners LLP, which was set up by three former employees of Foundation Energy Ltd., said May 1 that it planned to raise as much as $500 million for a fund trading gas, power and coal contracts.
Commodity-hedge funds returned 22 percent on average last year, compared with 20 percent in 2005, according to Cole. The benchmark Standard & Poor’s Goldman Sachs Commodity Index of 24 commodity prices lost investors 15 percent last year.
