Despite the high-profile failures such as Amaranth Advisors, the less-told story is about the hedge funds that are making money hand over fist in energy and other commodities. According to Bloomberg News, two well-known hedge funds have seen returns grow more than 100% so far this year, thanks to the commodities bust. Boone Pickens’ BP Capital Energy Commodity Fund, which danced happily to the rhythm of the gyrating oil and natural gas market, is up 120%, while Michael Farmer’s Red Kit Fund is flying high, reaping a 108% boost because of his fancy footwork in metal investing. “Those who have worked for more than 10 years at the big commodity trading houses have seen it all before,” Jeremy Charlesworth of London-based BDO Stoy Hayward Investment Management told Bloomberg News. “They know how the markets work and how tricky they can be. Gray hairs are of great benefit.” Unfortunately, not all the Pickens and Farmer wannabes fall into that category and end up with a disaster on their hands. “Funds that have a good base of qualified and experienced traders who have a firm understanding of the time horizons of their trades have a very good chance of reaping continuous returns,” Art Gelber of Houston energy consultant Gelber & Associates said in a BN interview. No truer words may have been spoken regarding commodities. As the number of failed funds fueled by wrongheaded commodities bets increases, those in the know bring good tidings to their investors. The Singapore-based Merchant Commodity Fund, for example, has grown a respectable 22% so far, while London-based Armajaro Asset Management has seen its commodity fund increase by 15.1%.
