By Jeanine Prezioso
NEW YORK Dec 30 Commodity hedge fund Higgs
Capital Management, founded by two former bank commodity
executives, will wind down and return money to investors as it
faces headwinds raising money, joining other commodity funds
that closed this year.
The fund will return investor money and will wind down in an
"orderly fashion," its founders, Neal Shear and Jean Bourlot
said in a note to investors on Monday. Higgs managed some $250
million and invested in energy, metals and agriculture markets,
Shear told Reuters.
"Over the life of the fund we made money," he said. "Our
closing is largely a factor of redemptions that are happening in
the commodity market and lack of stability of our capital."
The fund could have continued to manage money into next year
but would have had to cut expenses and restructure the fund, the
pair said in the note. This would result in having to change the
product it had initially marketed to its clients as well as its
"strong risk management culture."
"These changes would have handicapped our performance going
forward which would have been detrimental to existing investors
Shear and Bourlot are long-time commodity traders. Shear
spent 25 years at Morgan Stanley where he helped build the
firm's commodity trading business until his departure in 2008.
He joined UBS in 2010 for a short time after working for more
than a year at private equity fund Apollo Global Management.
Bourlot headed agriculture trading at Morgan Stanley before
he moved to UBS as global head of commodities. He departed at
the end of 2011 after about 18 months.
The pair left UBS to start Higgs, which was based in London.
It has been a tough year for the commodity investment
community as a whole.
Banks faced unprecedented regulatory requirements and hedge
fund investors sought to redeem capital from underperforming
funds. Low volatility has plagued markets, adding to sluggish
Hedge Fund Research Inc, which tracks funds' performance,
said losses in commodities have forced its HFRI Macro Index down
2 percent through the third quarter.
London-based commodity fund Clive Capital, which primarily
traded oil, announced it was closing in September, citing a lack
of investment opportunities. That same month, commodity fund
Arbalet Capital, run by 30-year-old Jennifer Fan, announced it
was shutting, citing investor redemptions after slack returns.
Large banks, once active and profitable in the sector,
announced this year they would sell off physical commodity
businesses, pressured by the U.S. Federal Reserve.
Two weeks ago, Morgan Stanley announced it would sell its
global physical oil trading business to Russian oil giant
Rosneft, after much conjecture throughout the year of what the
bank might do with the business in the face of declining
In July, JPMorgan Chase & Co said it would exit its
physical commodities business, due to regulatory pressure.
Earlier this month, Deutsche Bank said it would close its
global commodities trading business and cut some 200 jobs as it
faced increased regulatory scrutiny and pressure to hold onto