Global Investing

Commodities hedge funds feel the heat

rtx7ukh.jpgThe heat is on for hedge funds with commodities bets.

Earlier this week Ospraie Management told investors it is shutting its flagship fund after it plunged 27 percent in August. The fund’s energy and commodities stock positions fell as investors worried if a global economic slowdown will mean less demand for resources.

And now RAB Capital’s Philip Richards is giving up the CEO role to focus on his funds after an awful period of performance for his once high-flying Special Situations fund.

Losses on small-cap mining stocks, as well as its high-profile error in buying into troubled bank Northern Rock, meant its listed feeder fund fell 38.1 percent from the start of the year to Aug. 21.

One of the potential danger areas for hedge funds in this area is liquidity – how quickly they can dump stocks when investors decide enough is enough and want to pull their cash out.

The problem is that during the commodities boom of the last five years the flood of investor money has encouraged some funds to invest in less crowded areas such as smaller companies. These are easy to trade in a bull market but buyers can quickly disappear in a downturn.

Will invasion of Georgia steel EU into kicking its addiction to Russian oil and gas?

As George Bush might say, the EU is addicted to Russian energy. While no member wants to kick the habit totally, Brussels would like the bloc to reduce its growing dependence.

Even before Moscow invaded Georgia, the main non-Russian route for exporting Central Asian and Azeri crude and gas to Europe, the EU watched Russia’s regular cuts in energy supplies to neighbours with concern.

But EU members have been reluctant to take the hard measures that would allow them to bypass Russia, so analysts think their reliance on Moscow will grow.

Water, water everywhere

British water companies announced a plan earlier this week to
increase household water bills by up to 4.5 percent above
inflation between 2010 and 2015.

A pain for households, yes. But such increases underline a trend
that may prove tempting to investors searching for new commodity
assets as oil, gold etc tumble from their peaks.

The water index on the International Securities Exchange, which
includes companies engaged in water distribution, water
filtration, flow technology and other water solutions, has risen
more than 5 percent since January.