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Source: Reuters

INVESTOR PROFILE-Ospraie's Anderson lures back commod investors

Published: 25 Mar 2010 12:15:41 PST

* Ospraie's commods fund up 1.9 pct to Feb, beating index

* Funds raise $500 million in new capital over nine months

* Investors seeking commodity expertise return to Anderson

NEW YORK, March 25 - Dwight Anderson, the star commodities hedge fund manager who was hit hard even before the worst of the financial crisis, is beating the market again with two new funds and raising money faster than some peers.

Anderson is still rebuilding the nearly $4 billion flagship commodities fund that he shut down in September 2008 after it lost nearly 40 percent of its value. Yet, the former bungee-jumping and heli-skiing enthusiast is finding favour with investors who place a premium on experience in the niche commodity space.

Until its fall 18 months ago, Anderson's New York-based Ospraie Management LLC was one of the best performing commodity hedge funds, returning about 15 percent a year since its inception in 1999 through 2007, according to investors. At its peak, its assets totaled almost $9 billion.

Anderson returned to the space last summer, launching two new funds with $100 million -- one focused on commodity futures and derivatives and the other on listed companies.

While it's been a challenging period for many commodity investors, his new funds have eked out returns that have bested market benchmarks.

Performance aside, Anderson, who turns 42 this year, has also raised close to another $500 million for the two funds. Much of that has come from those who had previously invested -- and even lost money -- in his earlier funds, according to people familiar with the fund raising.

"Not every fund manager gets good traction with former investors. Dwight Anderson has it because he's conducted himself very honorably," said Mike Hennessy, managing director at Morgan Creek Capital Management, a $9.8 billion fund of funds in North Carolina that used to have money in Ospraie.

Still, not everyone's convinced that Anderson has learned his lesson from 2008, when he was criticized for loading up too much on a single stock. The stock, oil shale explorer XTO Energy, fell 35 percent by mid-September 2008 from the year's peak, contributing to Ospraie's losses.

Even after this year's takeover bid by Exxon, the stock has hardly recovered.

"I think any fund that closes down when they have poor performance and then reopens, that tarnishes whatever reputation they've had," said Jeffrey Vale, director of research at Infinity Capital Group, a fund of hedge funds in Atlanta that does not invest with Ospraie.

A spokesman for Anderson and Ospraie declined comment.

OUTPERFORMED A DOWN MARKET

Ospraie's new Commodity Fund returned 12.4 percent before fees last year and 1.9 percent in the first two months of this year, besting the 3.8 percent decline in the broad-based Dow Jones-UBS Commodity Index.

Commodity-focused hedge funds in the HFRX Commodity Index run by Chicago's Hedge Fund Research fell 3 percent in 2009 and 2.2 percent for the year to February.

Ospraie's new Equity Fund gained 14.6 percent for the six months to 2009 and 0.8 percent through February.

In comparison, the S&P Global Natural Resources Index, which tracks equities of agribusiness companies, oil and gas explorers and metals and minerals firms, rose 21.8 percent for the six months to December, but fell 7.6 percent through February.

BESTED PAULSON

Anderson also appears to have had better luck in luring investors than John Paulson, another hedge fund luminary who launched a gold fund in November after making billions of dollars betting on the U.S. housing market bust in 2008.

Paulson put $250 million of his own capital into his gold fund and until February, had seen it grow by only about $100 million, according to an investor in his Paulson & Co firm, which manages about $30 billion and was ranked the third largest hedge fund for 2009 by industry magazine Alpha.

A spokesperson for Paulson & Co declined to comment.

Anderson started at the commodities desk at J.P.Morgan before going on to work for legendary hedge fund manager Julian Robertson's Tiger Management, and Paul Tudor Jones' Tudor Investment Corp. He began Ospraie -- inspired by a marine bird of prey of the same name -- as an unit within Tudor before making it independent in 2004.

He eventually became one of the biggest commodity hedge fund managers, surviving a few market tumults along the way, until his world collapsed in the summer of 2008.

Since the recovery of markets last year, investors have started returning to hedge funds.

Data from Chicago's HFR shows an average 20 percent gain for all hedge funds last year, the best in a decade, and making up all the industry lost in 2008.

Yet, hedge fund debacles -- like the 86 percent loss reported last week at U.K. metals fund Ebullio Capital Management -- continue keeping some away from these risky, unregulated pools of capital that invest in almost everything from stocks to debt to art and wine.

Still, some of those investing seem to trust managers on the comeback like Anderson.

"I haven't seen him doing this big prime broker presentations," said a source, referring to a popular avenue for fund raising which Anderson hasn't used. "From what I gather, people are finding him on their own."

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