Hedge funds owned by commodity giants including Cargill and Louis Dreyfus have outwitted their standalone rivals in a year of market volatility that has disrupted traditional models for oil and metals trading.
They have used their knowledge of agricultural markets to trade products that have been less affected by central bank liquidity injections or heightened tensions in the Middle East as many other funds have had their worst year in a decade.
The $2.4 billion Louis Dreyfus Commodities Alpha Fund, owned by the eponymous 161-year old French trader, has returned around 7 percent to end-November. The leveraged version is up about 15 percent, one source who has seen the numbers said.
It made money betting on agricultural prices during the U.S drought, a devastating period of dry weather across the North American farm belt, two sources familiar with the fund said.
Black River Asset Management, owned by U.S. trading behemoth Cargill, has returned 9.2 percent to the end-Nov. in its Commodity Trading Fund, one source said.
"These large houses have a pretty good understanding of the agriculturals markets and these markets were really driven this year by fundamental reasons, supply-demand issues, and not by the macro environment, the risk-on, risk-off trades," Gabriel Garcin, a portfolio manager at Europanel Research & Alternative Asset Management in Paris, said.
By contrast, the average commodity fund is heading for its worst year in more than a decade and is down 3.08 percent to end-Nov., according to an estimate of the Newedge Commodity Trading Index - Trading, one of the most widely-watched.
Unprecedented injections of central bank cash and volatility in the run-up to the "fiscal cliff" - tax hikes and spending cuts in 2013 that could tip the U.S. into recession - confounded the models of many managers trading oil and metals.
"This year has been very disappointing, with flat and choppy trading," said Fabio Cortes, head of Macro and Commodities at hedge fund investor Oakley Alternative Investment Management.
Among the more prominent funds facing losses are Chris Levett's oil-focused Clive Capital, down 7.8 percent, and Michael Coleman's Merchant Commodity Fund, down 9.06 percent, both to Nov. 23, investors in the funds said.
While commodity funds slump, the average hedge fund across all strategies is up 4.79 percent, Hedge Fund Research shows.
Big, secretive trading houses - staffed with thousands of employees in dozens of countries - have a reputation for unrivalled on-the-ground knowledge of local commodity markets.
Geneva-based Galena, which runs $2.2 billion in assets, boasts of an "informational edge" thanks to access to Trafigura's insight into global supply and demand dynamics. Galena made 3.65 percent in its Energy Fund in the first 11 months of the year.
Others have looked to former employees at trading giants to launch new funds.
Armajaro, a London trading house specialising in cocoa, hired ex-Glencore veteran John Tilney in 2004 to set up Armajaro Commodities Fund, part of the its asset management arm.
The $1 billion fund is up 1.2 percent to end-Nov., an investor letter shows, making back some of last year's losses.
Across the sector as a whole, commodity hedge funds have less to shout about. Losses this year come on top of a fall in 2011 - a far cry from the annualised 25 percent of 2000-2007.
Frustrated investors have also pulled money from poor performers, including Singapore-based Merchant.
Part of the problem for traders has been a struggle to understand the impact of central bank quantitative easing on metals prices. Even as slowing economic growth hit the prices of some, the printing presses were propelling others higher.
"At the moment it is very hard to break the macro apart from the commodity. Commodity prices are increasingly dependent on decisions being made by elected politicians or unelected committees," Christopher Brodie, manager of the Krom River Commodity Fund, wrote in his latest monthly letter to clients.
Brodie, whose $730 million fund is down 4.07 percent to end-Nov., cited gold and silver as an example. If governments print more money via QE, precious metal prices should rise, he wrote.
But if at the same time they make progress in cutting budget deficits - reducing the need for more QE - prices should fall. The mixed impact makes it difficult to predict trajectories.
And QE-related events affect more than just precious metals.
"Managers didn't understand the impact of quantitative easing on commodity prices in the second half of this year," Cortes said, referring to a QE-stoked rally in base metal prices even as iron ore fell on signs Chinese demand was stalling.
While Galena managed to make money in its Energy Fund, the firm's Metals Fund is down 5.79 percent to end-.Nov.
Three-month copper on the London Stock Exchange has risen almost 10 percent since June to around $8,000 a tonne, while the iron ore benchmark 62 percent grade fell from $137 in June to $86 in September. It has since recovered to $132.
Funds trading a whipsawing oil price also struggled. Heightened worries about the fiscal cliff weighed on prices just as Iran's nuclear program and violence in Syria supported prices, making for volatile trading.
London's Brent crude had risen to as high as $126 a barrel in the first quarter before dropping as low as $89 in June and then rebounding to today's $108 on signs of progress in talks to resolve the U.S. budget crisis.
Andy Hall's $4.8 billion oil-focused Astenbeck fund - run out of Connecticut - was headed for a fall but made money in Nov. to leave him up 3 percent for the year.
Taurosso Capital's Clive Strategist Fund, which shares the same London address as Levett's fund, was not so lucky and is down 4.81 percent to end-Nov. since starting in Sept., a client letter said. The fund has two-thirds of its exposure to energy.
"We had this very strong first half ... The second half of the year, it's been more of a mixed bag, and November was awful," Garcin at Europanel said.
Big winners this year should have come out of the U.S. drought. Wheat prices surged 40 percent between mid-June and July, while corn rose more than 60 percent between June and mid-August, but most managers were caught off-guard.
"Very few people got the drought right," said Tyler Stevens of U.S.-based Commonfund, a firm managing $24 billion in assets with a small exposure to commodities.
All of the funds mentioned declined to comment or could not immediately be reached to comment.
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