Asia-based trading giant Olam enters commodity funds space

April 21, 2014  

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  Manvinder Singh
Singapore-based Olam International, one of the leading trading companies in the global agriculture commodities sphere, is moving into the hedge fund arena with a multi-product fund management platform focused on commodities.

Having built a three-year internal track record, the group has just opened its maiden offering – a multi-strategy commodity fund called the Ektimo Commodity Fund – to external investors. Next in line are a discretionary agriculture-focused fund and a quant macro offering.

The move is stirring considerable interest in the investor community, given the Olam group’s strong institutional backing and deep experience in the commodity space.

Olam, which earned S$20.85 billion ($16.7 billion) in revenues in FY2013, is owned 24.1% by Temasek and has been in the agriculture commodities business since 1989.

"In the early 2000s, Olam decided to leverage its IP to trading and market-making as well as building a financial services business," said Ferrell Daste, head of business development at Invenio Fund Management, a 100%-owned asset management subsidiary of Olam.

The Ektimo strategy was launched in July 2010 with more than $50 million in assets from Olam’s internal capital resources, along with commitments from employees and a strategic investor.

A quantitative-based fund, Ektimo has three main underlying strategies: relative value (mean reversion), term structure trading and a trend-following programme.

The strategy is managed by Invenio’s head of quantitative trading Manvinder Singh and his team. It returned a solid 10% in 2013, despite challenging conditions in the commodities space, and is up by some 0.6% this year to date.

Olam has now opened the fund to external investors, and the launch is said to be generating good traction with investors. "The commodities markets are in a state of disarray, but a key differentiator for us is that half of our portfolio is in agriculture-related investments – whereas most commodity funds are energy or metals space-focused. This plays to our strength," said Daste.

While many commodity funds generally comprise only a handful of large and concentrated directional bets, Ektimo’s portfolio consists of a large number of diversified, smaller positions.

"In short, we run a diversified, quantitative strategy with no human emotions," added Daste. "Given our target returns of 10-12% with a 10-15% volatility, we easily fit into a lot of investor buckets. In fact, investors are telling us that we stabilise their commodity managers’ exposure."

Invenio shares middle office, back office and risk management resources with its trading group parent, giving it a ready-made institutional infrastructure platform.

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