Ospraie Hedge Fund Muffs Metals Rally

Surging commodity prices have enriched much of Wall Street this year, but not investors in Ospraie Management.

At the end of April, the $4 billion hedge fund group, which specializes in betting on metals and other commodities, was down a little more than 10% for the year in its flagship fund. People familiar with Ospraie say the fund has taken a beating this year due to a series of bearish bets on the price of copper and silver, both of which are soaring to new heights.

Sources say Ospraie was net short on copper and silver until recently. Earlier this week, the Financial Times reported that Ospraie was closing out many of its short positions in copper and that the hedge fund's short-covering had fueled an additional spike in copper prices over the past few weeks.

A spokesman for Ospraie declined to comment on the fund's performance, saying that "as a matter of policy, the fund doesn't comment on performance or our strategies.''

The fund's bad start to the year hasn't led to any wave of investor redemptions. People familiar with Ospraie, which also has about $1 billion invested in stocks, say most investors are subject to a so-called lockup provision that bars them from pulling out their money.

But the poor performance at Ospraie is a bit of a shocker, given the 45% gain this year in the Commodity Research Bureau's Metals Index. It's even more surprising in light of the sterling reputation of Ospraie's founder and senior portfolio manager, Dwight Anderson.

The 38-year-old Anderson is a veteran of Tiger Management, the now-closed hedge fund that was led by legendary trader Julian Robertson. He later moved to Tudor Investment, a $15 billion fund, before leaving to go out on his own.