For commodity hedge funds, May proved to be the cruelest month, as prices of oil, gold, sugar and cocoa plummeted in tandem amid concerns they were overbought.
Among the blue-chip managers hurt in May by their commodity exposures were Graham Capital Management, BlackRock, Tudor Investment Corp. and Renaissance Technologies. The $3.1 billion Graham Global Investment Fund dropped 8.22% during the month, leaving it down 4.40% for the year through May, while the $8 billion BlackRock Global Ascent Fund dipped 1.27% for the month and was down 31 basis points for the year through May. Tudor’s $1.5 billion Tensor Portfolio dropped 6.75% in May, leaving it down 5.17% for the year, while Jim Simons’s $2.7 billion Renaissance Institutional Futures Fund fell 3.40% during the month and was down 0.12% for the year.
The London firm BlueGold Capital Management’s BlueGold Global fell 23.10%, wiping out its gains for the year and taking it into negative territory with a loss of 10.44%.
Commodity-focused hedge funds still outperformed the markets in May—the AR Commodities Index dropped 2.26% against the S&P GSCI, a commodities index, which declined 6.89%. But for the year, commodity hedge funds are lagging the markets. The AR Commodities Index gained 5.43% this year through May, while the S&P GSCI gained 8.46% in the same time frame.
At least one manager, Astenbeck Capital Management’s Andrew Hall, says the sell-off was excessive and that he is optimistic that growth will continue in the second half of 2011 (see Commodity-focused Astenbeck drops in May). Oil peaked at $114.43 a barrel in late April before dropping to about $98 in early May, while gold went from $1,541.50 an ounce on May 2 to about $1,475 a few days later.
Yet uncertainty surrounding China’s economy could have an adverse effect on commodities, which are heavily reliant on emerging markets. Chinese companies have come under increased scrutiny recently amid questions of accounting practices and allegations of fraud.
