Hedge Funds Walloped In Commodities Rout

By Christian Berthelsen And Rob Copeland at The Wall Street Journal

Three years after private-equity giant Carlyle Group CG 0.30 % LP touted its purchase of a hedge-fund firm, a rout in raw materials has helped drive down holdings in its flagship fund from about $2 billion to less than $50 million, according to people familiar with the matter.

The firm, Vermillion Asset Management LLC, suffered steep losses and a wave of client redemptions in its commodity fund after a string of bad bets, including one tied to the price of shipping of dry goods, such as iron ore, coal or grains. At one point, two of Carlyle’s co-founders, David Rubenstein and William Conway, put tens of millions of dollars of their own money in the fund and left it in amid the losses and redemptions, according to people familiar with the matter.

Vermillion is in the midst of a restructuring, its co-founders left at the end of June, and it is pulling back from trading in several markets.

A collapsing market for raw materials is spreading pain well beyond commodities specialists to some of the heaviest hitters on Wall Street.

This week alone, commodity-trading firms Armajaro Asset Management LLP and Black River Asset Management LLC, a unit of agricultural conglomerate Cargill Inc.,

Originally appeared at: http://davidstockmanscontracorner.com/hedge-funds-walloped-in-commodities-rout/