Ospraie Management, the US hedge fund firm run by commodities trader Dwight Anderson and part owned by Lehman Brothers, is to shut down its flagship fund and return money to investors after the fund suffered heavy losses in August.
The Ospraie Fund, which was launched in February 2000, lost 26.7 per cent in August and was down 38.6 per cent over the year to date. It had about $2.8bn at the start of August.
In a letter to investors, seen by the Financial Times, Mr Anderson wrote: “I am extremely disappointed with this result and the fund’s sudden reversal in performance.” The losses were primarily caused by a sell-off in the fund’s energy, mining and resource equity holdings.
Given the level of anticipated redemptions, in addition to outstanding redemption requests, the fund’s managers and board decided to suspend redemptions and conduct an orderly disposal of the fund’s remaining positions.
The letter said the balance of the fund’s assets, which will consist mostly of illiquid investments, will be returned as investments are sold off. The letter said it could take as long as three years to dispose of remaining portions of the portfolio.
Mr Anderson wrote: “Not only as portfolio manager, but as one of the largest investors in the Ospraie Fund, I have shared in these losses with you. After nine years of striving to be a good steward of your capital, I am very sorry for this outcome.”
The fund had been one of the leading specialist commodities funds. From inception to the start of this year, it had returned 15 per cent annually. Ospraie still manages more than $4bn in other investment funds, including its $1.2bn special opportunities fund.
Ospraie’s fate could play a role in efforts by Lehman Brothers to raise fresh capital ahead of its earnings release later this month. Lehman is considering options including selling all or part of its asset management arm – which includes Neuberger Berman, an equity investor, as well as stakes in hedge funds including Ospraie.
Some potential investors in the asset management arm have expressed reservations about Lehman’s hedge fund holdings. Ospraie has veto power on a sale of Lehman’s stake in it, and it might be willing to buy the stakes back at bargain prices, officials have said.
Lehman bought a 20 per cent stake in Ospraie in 2005, when it managed about $2bn. The deal followed JPMorgan’s decision to buy a stake in Highbridge Capital Management.
