Big commodity investor to liquidate fund as prices dive
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This summer’s plunge in commodity prices has claimed a large victim: Ospraie Management in New York has told clients it will liquidate its $2.8-billion flagship investment fund because of heavy losses.
Ospraie, a well-known player in commodity markets, has been stung as prices of oil, copper, aluminum and other raw materials have dived since early July, in turn dragging down stocks of commodity producers.
Bloomberg News reports on a letter from Dwight Anderson, the fund’s 41-year-old manager, to clients:
The Ospraie Fund lost 26.7% in August after a ‘substantial sell-off in a number of our energy, mining and resource equity holdings,’ Anderson wrote. ‘I am extremely disappointed with this result and the fund’s sudden reversal in performance. After nine years of striving to be a good steward of your capital, I am very sorry for this outcome.’
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Tuesday brought more grief for commodity investors as a fresh plunge in crude oil prices helped pull many other raw materials sharply lower. Gold futures sank $24.30 to $805 an ounce; wheat futures slid for a seventh session, off 35 cents to $7.44 a bushel.
With the global economy slowing, many investors who were wildly bullish on commodities a few months ago are reluctant to step up now, even if they believe the long-term outlook remains favorable, traders say. The Reuters/Jefferies CRB index of 19 major commodities slumped 3.4% on Tuesday to its lowest level since February. The index tumbled 5.9% in August after diving 10% in July.
The second half of 2008 ‘will not be favorable for commodity prices,’ investor Marc Faber, publisher of the Gloom, Boom and Doom Report, told Bloomberg. ‘We peaked out. We’ve been in an extended bull market and a big correction can follow.’