* Fund up 7 pct in first six months
* Focus on relative performance between commodities
* Energy positions make up 75 pct of the portfolio
LONDON, Jan 30 (Reuters) - Commodity funds have mostly been a graveyard for investment returns since 2009, yet London-based asset manager IKEN Capital's new fund has bucked the trend in its first six months.
Using a combination of algorithmic and relative value strategies while hedging out macroeconomic risk, the Commodity Alpha Fund is up over 7 percent since its "soft" launch in June 2012, having navigated tricky third and fourth quarters in which many commodity funds were hard hit.
A study of the Thomson Reuters Lipper Global commodity sector shows active managers who did well in the third quarter tended to suffer in the fourth and vice versa, as a rally in grains reversed and out-of-favour commodities such as iron ore bounced.
For the year as a whole, the average actively-managed fund in the Lipper Global commodity segment ended 2012 down 1.6 percent.
Many investors have become disillusioned with the variable performance from commodity funds in recent years. Traditional trend-following managers have struggled as a lack of global growth has given way to range-bound markets without strong trends.
"We expect this to continue as China growth cools and the commodity super-cycle comes to an end," said George Hutson, IKEN Capital's chief investment officer.
Another problem is that some commodity markets are being driven more by macroeconomic factors than their own fundamentals, creating a "risk on, risk off" pattern which is challenging for fundamentals-focused managers to navigate.
IKEN's strategy aims to overcome such hurdles by being ambivalent about overall commodity direction. Instead of speculating where crude oil might be in three months' time, the fund takes a view on relative performance between commodities.
"We're more focused on the relationship between commodities - whether iron ore will outperform nickel or platinum will outperform gold," said Hutson. A degree of manager discretion is also employed.
This approach helped the fund benefit from an announcement by Hess Corp on Monday that it was closing its Port Reading, New Jersey refinery, sending gasoline prices and refining margins (or cracks) sharply higher.
"Our models alerted us to a change in value for gasoline over a week ago and we've been long the gasoline/crude crack ever since," said Hutson. "(This) was an event that would have been difficult for fundamental/trend-following systems to forecast and exploit."
Hutson is one of IKEN's three founding partners who previously worked together at Schneider Trading, a proprietary trading house which was taken over by Marex Spectron in 2012.
The fund's market-neutral relative value strategy targets a 20 percent annual return net of fees. It was up 56 percent in 2010 and 39 percent in 2011.
Energy positions currently make up about 75 percent of the portfolio, with the rest split between metals and softs, as well as markets such as orange juice, plus cattle and hog spreads. "The more strategies you can have that are uncorrelated, the smoother the return," said co-founder Christophe de la Celle.
The team set up the fund with their own money and early investors include high net-worth individuals and family offices. Once assets under management hit $100 million, IKEN plans to target investments from bigger institutions.