Mr. Copper has wound up on the road less traveled.
Michael Farmer, 71, who earned his nickname from years of trading the metal before co-founding Red Kite Group in 2005, was once part of a thriving band of metals hedge-fund innovators able to rock markets with a single trade.
Now, the roster of big-time funds has all but evaporated, victims of global surpluses, slowing Chinese demand for metal and poor performances that led investors to pull money out.
While Red Kite has stayed the course with $2.2 billion of assets, researcher eVestment counts just three dedicated base-metals players in its database of more than 8,000 hedge funds. The exodus has contributed to weaker trade on the No. 1 metals bourse, with activity on the London Metal Exchange set for its largest annual drop since at least 2008, figures compiled by Bloomberg show.
"The fund industry is deserted," said Christoph Eibl, chief executive officer of Tiberius Asset Management AG, with $750 million in commodity investments. "Most of the big brand names that you were used to seeing five years ago are no longer available or around.”
Wrong-footed by a weakening in the Chinese demand that powered earlier bull markets, specialist funds suffered as clients took their cash elsewhere, with many closing. Galena Metals Fund, one of the largest, shut last year. It joined other natural-resource firms that had once bet big in metals such as Brevan Howard Commodities and Clive Capital LLP.
"What you have is a void,” said Michael Lion, a consultant at Lion Consulting Asia Ltd. who has been in metals for almost half a century. “Financial players, hedge funds have now walked away from our market."
While tracking the industry is tricky, Barclays Plc estimates base-metal assets in hedge funds, exchange-traded funds and similar investments are down by almost half from 2010 to about $17 billion as of September.
Blenheim Capital Management LLC, once the top commodities hedge fund and a big base metals player, has seen assets managed fall about 80 percent from a peak in 2011 to about $1.5 billion this year amid redemptions and several years of losses.
"If you turn the clock back to 2008, we had multiple billion-dollar-plus hedge funds putting lots of money into base metals,” said Paul Crone, chief investment officer at Citrine Capital Management LLC, one of the few remaining metals hedge funds. “Many of these guys are now unfortunately gone.”