Astmax Commodity Fund Favors Short Bets, Sharpens Oil Focus

By Tomoko Yamazaki, Komaki Ito and Shigeru Sato

Nov. 5 (Bloomberg) -- Astmax Commodity Global Macro Fund, run by former Sumitomo Corp. copper trader Tetsu Emori, will sharpen its focus on oil after making a 12 percent return since May by selling grain, fuel and metals futures in falling markets.

The 1.4 billion yen ($14 million) fund, which takes long and short positions in global commodity markets ranging from corn and coffee to aluminum and oil, rose every month since inception on May 12 through October, according to Emori. It rose 2.6 percent last month, beating an estimated 2.6 percent drop by the Eurekahedge Hedge Fund Index.

``We take a fundamental approach, rather than depend on computerized models,'' Emori, 42, who's studied commodity markets for 19 years, said in an interview in Tokyo yesterday. ``We literally take positions to cut losses and take profits on a daily basis.''

The Cayman Islands-based hedge fund's strategy in November will hinge on oil prices and their affect on the production costs of other commodities. Prices of commodities dropped 34 percent during the past six months, as measured by the Reuters- Jefferies CRB Index, and may keep falling as the global economy falters.

Crude oil futures in New York lost half of their value since reaching a record $147.27 a barrel on July 11 amid concerns that the slowing global economy will cut demand. Oil traded at $69.77 a barrel at 9:27 a.m. in Tokyo.

``Those sorts of moves make it very difficult to read the price direction,'' Emori said.

Chakib Khelil, the president of the Organization of Petroleum Exporting Countries, on Oct. 23 cited speculators exiting from the market as a reason for the price drop.

Commodity Exchanges

Astmax's six-month gain is double that of the 6 percent increase by the Eurekahedge index measuring managers who trade futures, known as commodity trading advisers, or CTAs.

The fund invests in about 30 commodities globally via contracts on exchanges such as the New York Mercantile Exchange and Chicago Board of Trade. It doesn't invest via the over-the- counter market because this would add the risk of dealing with individual companies which could collapse, Emori said.

It aims to raise assets under management to 10 billion yen over the next year by attracting more institutional and high net-worth individuals.

Falling commodity prices provide opportunities for hedge funds such as Astmax that can short, or borrow a security aiming to profit by repurchasing it later at a lower price and returning it to the holder, pocketing the difference.

The $2 billion Merchant Commodity Fund in Singapore, run by former Cargill Inc. traders, gained 12 percent in September as energy and agricultural prices slumped, two people with knowledge of its performance said.

Biggest Risk

The biggest risk for Astmax is if markets move a little, Emori said. He added that price moves unrelated to fundamental factors such as supply and demand, as seen in oil markets recently, make it more difficult for his strategy to work.

Emori was most recently at a unit of Mitsui & Co., working as a commodity strategist before joining Astmax in 2007. Prior to that, he worked for Sumitomo, Japan's third-biggest trading house, for seven years as a copper trader.

At Sumitomo, Emori worked under Yasuo Hamanaka, who was dubbed ``Mr. Copper'' and ``Mr. Five Percent'' because he once bought as much as 5 percent of all the copper traded in the world each year. Hamanaka later served seven years in prison for hiding $2.6 billion in copper trading losses.

Hedge funds, a $1.8 trillion industry, are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net; Shigeru Sato in Tokyo at ssato10@bloomberg.net