Ebullio Commodity Hedge Fund Says January Loss Was 70% Not 1.1%
2010-03-16 18:20:22.592 GMT
By Chanyaporn Chanjaroen and Tom Cahill
March 16 (Bloomberg) -- Ebullio Capital Management LLP said its commodity hedge fund fell almost 70 percent in January, not the 1.1 percent decline originally reported to investors, letters to investors show.
The 1.1 percent drop was announced in the January notice and changed to 69.65 percent in the February report, the documents show. The fund, based in Southend-on-Sea, England, fell another 86 percent last month, taking its plunge in the first two months to 96 percent. The biggest losses were in copper, nickel and tin, according to the February letter.
"The moment we knew the actual January loss, we brought that up to our investors immediately," Lars Steffensen, the founder of the company, said today by phone. He declined to comment on the size of the discrepancy.
The LMEX index of six industrial metals fell 8.2 percent in January, the steepest drop since the end of 2008, before rebounding 6 percent last month. Commodity hedge funds returned on average almost 1 percent last month and lost 2.2 percent during the first two months of this year, according to Chicago- based Hedge Fund Research Inc.
"Extraordinary circumstances" forced Ebullio "to liquidate and/or cancel parts of the physical book and liquidate some long-held speculative positions, mainly in LME non-ferrous metals," Steffensen wrote in the February report, referring to the London Metal Exchange.
Gains in oil, wheat, gold and sugar last month were "drowned out by the hugely negative impact made by copper, nickel and tin," according to the report.
Assets Under Management
Ebullio made 29 percent last year and 92 percent in 2008, according to the reports to investors. The fund’s assets under management shrank to $1.47 million last month, from $42.3 million in November.
"We took the hit," Steffensen said by phone earlier today. "I’ve always bounced back."
The fund is waiving its 2 percent management fee for 2010.
Kinetic Partners LLP, the fund’s auditor, didn’t immediately return a call to its London office seeking comment.
GlobeOp Financial Services is the fund’s administrator, according to the investor letters.
"Estimates are generally developed by fund managers based on their own estimate of profit and loss," GlobeOp Financial Services said in an e-mailed statement today. "There is generally no involvement of the administrator in the development of these estimates."
Steffensen, 42, worked for companies including Gerald Metals Inc. and Next Energy Inc. before setting up Ebullio. The fund also invests in energy, precious metals and agriculture.
Hedge funds are mostly private pools of capital whose managers participate substantially in the profit from speculation on whether the price of assets will rise or fall.
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--Editors: Stuart Wallace, John Deane
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