LONDON Funds betting on commodity price moves have lost money every month since January, their joint longest losing streak on record, raising more doubts about their ability to make money at a time when the commodity "supercycle" may be over.
The average fund slid 3.58 percent in the first six months of the year, according to a widely watched Newedge commodity index. Funds have only suffered five consecutive losing months once before, in 2002-2003, the index shows.
Hedge funds market themselves as capable of making money in all markets, yet funds trading commodities as varied as gold, grains and gas, have failed to turn an annual profit in the last three years.
The weak performance will put more pressure on the industry to lower fees and introduce clawbacks, which enable investors to reclaim some performance perks paid to hedge fund managers in boom times if the returns they hope to achieve fail to continue.
Worries about cooling demand in key markets like China, and a huge shift in the supply-side from shortage to glut, has sent prices tumbling in recent years, and left many warning that the end of the commodity "supercycle" - the long period of rising commodity prices - is here.
"Historically most of these funds have been a levered beta play on the commodity cycle, or in some cases arbitrageurs of commodity spreads," Michele Gesualdi, portfolio manager at hedge fund investor Kairos, said.
"The end of the supercycle has hurt the first area, while the volatility and discrepancies that have arisen in forward markets have made life difficult for the second."
Adding to the sector's woes, hedge funds which trade other asset classes such as equities have rebounded this year, including those that trade mining and energy shares.
The $1 billion fund of Clive Capital, a firm which trades oil and ran about $5 billion at its peak, is down 3.5 percent to June 28, performance data shows. Krom River's Commodity Fund has lost 4.4 percent to end-June, while Brevan Howard's Commodities Strategies Fund is off 2.5 percent to June 28.
Funds trading bullion are nursing some of the heaviest losses. Gold has tumbled this year on expectations the U.S. Federal Reserve will cut back on its money-printing programme, which had driven gold to record highs.
John Paulson, the billionaire U.S. investor, has seen his gold fund, his smallest with $300 million in assets, plunge 23 percent in June and is down 65 percent this year.
Despite the losses, most managers are not down as much as commodity prices this year - the 19-commodity Thomson Reuters-Jefferies CRB index .TRJCRB fell 5.7 percent through end-June.
Some have also shone. After losing 30 percent in 2011 and 7.6 percent and a big chunk of his assets in 2012, Mike Coleman's Merchant Commodity Fund is up 24.2 percent this year.
But the bigger concern for commodity funds is proving they can consistently make money amid a sustained downward trend in prices.
The problem, investors and managers say, is that the long, gradual trend of rising prices has been replaced with shorter, more uncertain trends, in which prices can plunge suddenly, making it difficult to profit from their slide.
Commodity prices, down 22 percent from a 2011 peak, have entered bear market territory, while volatility - which some funds thrive on - has also fallen, challenging managers further.
All the funds mentioned either declined to comment or could not immediately be reached for comment.
(Reporting by Tommy Wilkes; Editing by David Evans)