A Star Com­modi­ties In­vestor Falls to Earth

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

Bloomberg Businessweek (North America) - - Mar­kets/fi­nance -

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

An­nual re­turns for Blen­heim’s flag­ship Global Mar­kets Fund

At its height in 2011, Blen­heim had $9.1 bil­lion in as­sets. That fig­ure has dropped

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