Four Elements Capital seeks 20% return on commodities

Four Elements Capital Pte is aiming to achieve an annual return of more than 20 per cent for its commodity fund as bets on sugar, copper and platinum prove successful, Managing Director Lionel Semonin said. The Earth Element Fund, established by former BNP Paribas and JPMorgan Chase & Co traders and overseeing assets of $7 million, advanced 5.4 per cent in March, beating the average return by its peer group, Singapore-based Semonin said in an interview yesterday. The fund rose a cumulative 3.5 per cent in the first quarter after a loss of 3.3 per cent in 2009, he said.

Last year was “very challenging,” said Semonin, former managing director of Paris-based BNP’s global Commodity Investor Group. “This year seems to be better. The fund did very well on sugar, and took advantage of the bull markets in metals particularly in aluminum, copper and platinum.”

Commodity trading advisers, or managers who trade futures globally, returned 2.1 per cent in March, data from Eurekahedge Pte showed. Hedge funds on average returned 2.7 per cent in March, the biggest monthly gain since September, according to Hedge Fund Research Inc. First-quarter gains averaged 2.6 per cent, according to the Chicago-based researcher. The fund’s objective is to return more than 20 per cent annually and keep volatility below 15 per cent in the next three years, Semonin, 39, said.

“From a macro-economic perspective, our analytics remain very bullish on a majority of commodities,” Semonin said. “In certain commodities like aluminum or crude oil, our analysis shows that price action may have moved ahead of the fundamentals and our stance would remain more prudent.” Most commodities still have “very high levels of stocks,” he added. The Singapore-based hedge fund profits from either taking long or short positions in 30 exchange-traded raw materials including 15 agricultural products, six energy commodities and nine metals, Semonin said.

The fund is bearish on sugar, corn and wheat as demand has yet to catch up with production, while metals such as copper, zinc, lead and tin will perform well along with, to a lesser extent, the energy complex, he added.

Semonin set up the asset management venture Four Elements Capital in December 2008 when commodities, measured by the Reuters/Jefferies CRB Index, approached a six-year low after the biggest plunge on record.

Prior to joining BNP, Semonin spent 10 years at JPMorgan.