The rout in commodities catches a top trader by surprise

Willem Kooyker’s fund lost value in four of the past five years The money manager is “the most secretive I have ever met”

Thirty miles west of Wall Street, in an anonymous office park set among New Jersey’s rolling hills, lies the headquarters of Willem Kooyker, one of the most powerful and enigmatic traders in the commodities game.

For a half-century, Kooyker has quietly ridden the ups and downs of oil, copper, cocoa, and more, first in his native Netherlands, later at Commodities Corp., then at his own firm, Blenheim Capital Management. Now, at 73, he’s struggling to contain the damage from a commodities collapse that even he never saw coming.

Oil has dropped from more than $90 per barrel in 2014 to $37 in March. Before the worst hit last year, Kooyker’s hedge fund firm was already hemorrhaging billions of dollars in assets. At its height in 2011, Blenheim was the world’s largest commoditiesfocused hedge fund manager, with $9.1 billion in assets; its assets have fallen almost 85 percent, to $1.5 billion, people familiar with his operation say. With the flagship fund losing money in four of the past five years, some investors are heading for the exits.

What went wrong? The short answer is that Kooyker didn’t think things would get this bad. He and his colleagues underestimated the economic troubles in China and never thought commodities prices would fall so far, so fast, the people said, speaking on the condition they not be named.

It’s a remarkable turnabout for Kooyker, whose tenure atop Commodities Corp. in the 1980s set the stage for two wildly lucrative decades at Blenheim. In 1999, as oil sank below $10 a barrel, Kooyker bet that commodities would bounce back, and his hedge fund soared almost 109 percent.

Kooyker has long operated under the radar, arguing that any publicity, good or bad, hurts investment returns. Few outsiders had any idea what he was up to at the height of his success. Today, most still don’t. The Blenheim operation is “the most secretive I have ever met,” says Christoph Eibl, chief executive officer of investor Tiberius Asset Management. Kooyker and others at Blenheim declined to comment on the fund’s recent performance, assets under management, or trading strategy.

Many other commodities specialists are suffering, too. Cargill, the agricultural giant, has shut one of its funds. Trafigura Group, the oil and metals trading house, has closed its flagship Galena Metals Fund. Trafigura estimates that the world’s top 10 commodities hedge funds now manage $10 billion altogether, a fifth of what they did in 2008.

Tall and stately, Kooyker is a regular presence on New York social and philanthropic circuits. He’s donated millions to the Metropolitan Opera, where his wife, Judith-Ann Corrente, is president of the board. He’s also a leading donor to Democratic political candidates. An admirer of Winston Churchill, he named his firm after Blenheim Palace, Churchill’s birthplace and ancestral home in Oxfordshire.

Kooyker began his trading career in 1964, at Internatio-Müller in Rotterdam. In 1981 he jumped to Commodities Corp., in Princeton, N.J., where the Nobel Prize-winning economist Paul Samuelson and a small band of erudite traders sifted through mounds of data on every commodity from aluminum to zinc.

Securities and Exchange Commission filings show Kooyker became president of Commodities Corp., but in 1984 he left to establish a joint venture between the firm and a group of Middle Eastern investors, a potentially valuable connection for any trader. In 1989 he formally struck out on his own, according to letters that Blenheim has sent to investors. By its own count, however, Blenheim’s track record predates 1989, going back to the days of Kooyker’s Commodities Corp. joint venture, Tricon Holdings. And what returns they were: In 1989 alone, the value of his investments doubled, Blenheim documents reviewed by Bloomberg show. Kooyker became a star.

Until its recent rough patch, Blenheim had posted an annual loss only five times in 30 years. Twice it returned more than 100 percent, and a dozen times at least 20 percent, according to Blenheim investor presentations, letters to clients, and people familiar with the fund.

Those lofty returns enabled Kooyker to charge unusually high fees. Although most hedge funds charge “2 and 20”—an annual management

fee equal to 2 percent of assets, plus 20 percent on any profits— Kooyker charges 2.25 and 25, according to Blenheim investor letters and presentations.

In 2011 the fund sank 23.5 percent, one of its worst years. More red ink flowed in 2012 and 2013, and again last year. The difficult run is particularly notable because Kooyker has been known for rigorous risk management. If one of his portfolio managers runs up a 10 percent loss, higher-ups demand to know why. If a loss reaches 20 percent, managers are forced to sell positions and take monthlong leaves. If they do worse than that, they’re usually shown the door.

People familiar with Blenheim say that, in retrospect, the firm’s assets grew so quickly during the early 2000s that Kooyker had trouble spotting moneymaking opportunities. NEPC, a consulting firm that advises pension funds about where to invest, also pointed to some problems. Blenheim “in some instances has been premature” with a strategy that later turned out to be right, NEPC said in a March 2014 presentation to the University of Maine’s committee that oversees endowment and pension funds. In some cases, NEPC said, Blenheim would respond to losses by reducing its exposure to risk, only to miss out on gains when the market rebounded.

Today, 50-odd employees help Kooyker run several funds. Historically he’s managed about 75 percent of the assets himself, but Kooyker now runs as little as 15 percent, according to a presentation in February by NEPC for the University of Maine funds. It said “this may signal a move towards his retirement.”

His longtime lieutenant and numbers whiz, Thomas Kopczynski, remains a key trader, people familiar with the structure say. Several other Blenheim traders have left. The question is whether more investors will depart, too. So far, Kooyker is heeding Churchill’s advice: Never give in.