Toomre Capital Markets LLC

Real-Time Capital Markets -- Analytics, Visualization, Event Processing, and Intelligence

Hedge Fund Red Kite Loses About 30% in January 2007

The metal markets have declined sharply in the last few weeks. The industrial metal copper is close to ten-month lows as global copper inventories monitored by exchanges in London, New York and Shanghai have generally risen. This Bloomberg article has an interesting tidbit: "Red Kite, part of a $1 billion hedge fund run by RK Capital Management LLP, lost about 30 percent in January as metals tumbled, according to two investors in the fund who declined to be identified."

Commodity markets are known to be particularly volatile, particularly when speculators are heavily involved and there are sharp shifts either in actual or perceived perceptions about supply. However, one has to wonder what type of risk management strategy this hedge fund was employing in January 2007. Apparently, the fund's worst previous draw down did not exceed twenty percent. This surprising loss is a sharp reversal from the fund's 2006 results which were reported to be up more than 100%. Does anyone have more information on this situation? Reader comment and thoughts are welcome.