September 3, 2008 / 8:52 PM / 11 years ago

Ospraie's Anderson forced to shut flagship

BOSTON (Reuters) - In the world of palladium, gold and soy beans, hedge-fund manager Dwight Anderson was known as an imposing figure with an appetite for risk.

A trader signals an order in a file photo. REUTERS/File

At 6-foot-3-inches (1.9-metres), Anderson’s towering physical presence was long matched by towering returns at his flagship 9-year-old hedge fund, one of several portfolios managed at Ospraie Management LLC, the world’s biggest commodities hedge fund firm.

But the 41-year-old investor, whose flagship Ospraie Fund Ltd returned 15 percent a year on average from 2000 to 2007 with $3.8 billion invested at its peak last year, may have attempted to climb too far too fast, say investors in his fund.

Anderson confirmed on Tuesday what had been rumored in the $2 trillion industry for days — the Ospraie Fund lost 27 percent in August, forcing him to close it with a crippling 39 percent loss for the year.

Anderson, who launched the Ospraie Fund while working for another hedge-fund legend, Paul Tudor Jones of Tudor Investment Corp, joins a growing list of prominent fund managers forced to shut funds or firms amid heavy losses in the last few months.

“After nine years of striving to be a good steward of your capital, I am very sorry for this outcome,” he wrote on Tuesday in a letter to investors such as Lehman Brothers, Credit Suisse and smaller endowments.

More details would come on Thursday, he added.

The hedge fund firm still manages other portfolios, including the $1.2 Ospraie Special Opportunities Fund.

Many investors were drawn to Anderson’s laser-like focus on the long-overlooked commodities sector where he logged millions of air miles inspecting mines and corn fields around the globe.

Two investors who declined to be identified expressed concern that his 80-person firm’s recent expansion might have been too quick at a time when many large investors were making big bets on commodities.

Anderson could not be reached for comment.

His investments, once limited to hard and soft commodities, expanded to include companies active in the sector. His operations also expanded. Ospraie Management’s purchase this year of ConAgra Food’s commodities trading unit vaulted the company into a new direction, investors said.

“Dwight Anderson was a rare breed and one of only a few people who really focused on commodities and ignored momentum trading in favor of value-based investments,” said one investor who asked not to be identified. “But this kind of thing shouldn’t happen and I blame it on poor risk management.”

At work and at play, Anderson embraced risk, people who know him said.

He acquired a taste for commodities while earning his MBA at the University of North Carolina and quickly moved from a job on JP Morgan’s commodities desk into the hedge-fund industry to work with industry icon Julian Robertson’s Tiger Management fund, and then to Tudor.

In 2004, with Tudor’s help, he started his own New York- based hedge-fund firm, which manages at least three funds.

In his free time he has jumped out of airplanes with skis strapped to his feet and raced ahead of stampeding bulls in Pamplona, according to an acquaintance.

Two years ago, Anderson and his investors got a jolt when souring bets on copper sent the Ospraie Fund tumbling roughly 20 percent. Anderson and his team recovered some ground, paring nearly all losses that year. Separately he shuttered a $250 million fund in 2006.

Editing by Jason Szep and Andre Grenon

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