A fund that backed luminaries of the commodities hedge fund world is returning money to investors after half of the star managers announced they were shutting operations.
The Blackstone Resources Select fund, run by New York’s Blackstone Group, held at least $2.4bn at its peak. It farmed out money from pension plans and other institutions to four managers in energy, metals and agricultural markets, according to industry executives.
Blackstone launched the fund in May 2007 as commodities from oil to wheat were racing to all-time records. It was a long-only product, meaning it bet exclusively on rising prices.
But rather than take direct positions in futures markets, the fund delegated trading decisions to outside hedge funds led by big names in the industry. “The underlying managers of Resources Select have proven successful track records and are difficult to access directly,” according to a 2011 New Jersey state government memo recommending an allocation to the fund.
Astenbeck Capital Management, managed by famed oil trader Andy Hall, was the energy specialist. Astenbeck in August announced it was closing down its main fund as it struggled to make money during an oil glut.
That was followed by a late September decision by Edesia Asset Management, an agricultural fund unit of commodities merchant Louis Dreyfus, to stop managing third-party money by year-end. Edesia was one of two agricultural specialists included in Resources Select.
Blackstone Alternative Asset Management soon afterwards decided to wind down Resources Select and return capital to investors, people close to the firm said. The fund’s assets totalled about $1bn as of September 30.
In addition to Astenbeck and Edesia, the fund also invested with Yannix Management, a Connecticut-based agricultural specialist, and Red Kite, a London metals fund, people familiar with its portfolio said. Yannix and Red Kite could not be reached for comment.
Investors have soured on commodities as an asset class as ample supplies cap prices. The S&P GSCI commodity index has had a total return of minus 58 per cent since late May 2007, while the Bloomberg Commodity total return index has lost 47 per cent.
From its launch, the Resources Select fund beat GSCI total returns by 42 per cent and the Bloomberg index by 29 per cent, said a person with knowledge of its results. This suggests investors who kept money in the fund from its inception would be sitting on losses, though much less than those passively tracking indices.
A large number of celebrated commodity hedge funds have met their demise in the past several years. Before closing the Astenbeck fund Mr Hall, an inveterate oil bull, warned that commodities prices would remain rangebound.
The average hedge fund focusing on commodity futures lost 3 per cent in the nine months to September, according to the SG Commodity Trading Index, an industry barometer.
With $74bn under management, Blackstone’s Hedge Fund Solutions group still invests with some individual commodity managers as part of its broader platform.
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