Higgs Capital Commodities Hedge Fund Closing After 18 Months

Dec 30, 2013 9:53 pm ET

(Updates with hedge fund gauge in last paragraph.)

Dec. 30 (Bloomberg) -- Higgs Capital Management LLP, a $250 million commodities hedge fund founded by Neal Shear and Jean Bourlot, is closing after 18 months due to “a lack of capital stability.”

Staying open would have required “a significant reduction in expenses along with a restructuring of the fund,” Bourlot, 40, said by e-mail today. The fund returned 7.5 percent since inception, he said. Investors were notified on Dec. 20, he said.

“There is a lack of capital stability, and we would have had to change our management culture significantly if we had chosen to go forward,” Bourlot said by phone today. “I still think there is a need for a multi manager commodity hedge fund in alternative management or active management with stable capital.”

Shear spent 25 years at Morgan Stanley and Bourlot was former commodities head at UBS AG before they started Higgs Capital to trade metals, energy and agriculture. Expenses would have risen in 2014 because of new regulations, Bourlot said.

Some of the biggest commodity hedge funds have closed since the start of last year. Clive Capital LLP, with $1 billion in assets founded by Chris Levett, told investors in September it planned to close and BlueGold Capital Management LLP, the $1 billion energy fund co-founded by Pierre Andurand, liquidated in April 2012 after losing 34 percent in 2011.

Third Year

Oakley Capital Management Ltd. closed its commodities fund of hedge funds in July as a gauge of performance across the industry retreated for a third year, according to two people with direct knowledge. Commodity-fund investments fell by a record $88 billion to $332 billion in the first 11 months, according to Barclays Plc.

“We noticed after September, our capital became the first derivative of other commodities hedge fund performance and when other people were underperforming, we got redemptions,” Bourlot said. “We’re not closing down because of lack of performance. We’re closing down because of lack of stability in capital due to the fact there is a general lack of appetite for commodity exposure.”

The Newedge Commodity Trading Index, which tracks hedge funds, fell 1.5 percent in the 11 months through November, extending two years of losses. Corn slumped 39 percent in the biggest annual decline since at least 1959 and gold is heading for its biggest annual loss in three decades.

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--With assistance from Matthew Brown in London. Editors: Nicholas Larkin, Claudia Carpenter