Ospraie fund to close

Ospraie fund to close after 27 percent August slide

Dwight Anderson in a letter to investors planned to distribute 40 percent of Ospraie Fund's assets to investors by September 30 and an additional 40 percent by year-end.

Anderson said in the letter he was extremely disappointed with the outcome.
"Not only as a portfolio manager, but as one of the largest investors in the Ospraie Fund L.P., I have shared in the losses with you," he wrote. "After nine years of striving to be a good steward of your capital, I am very sorry for this outcome."

Is this funds closing due to Ospraie management and poor risk controls?

This marks the second time in two years that Ospraie Management, which has been a major player in commodities markets, has run into problems. In early 2006 soured bets on copper left the fund down roughly 20 percent before it pared most of those losses by year's end.

Also in 2006 Anderson, who made his name in hedge funds at Tudor Investment Corp. and Tiger Management LLC, closed down his $250 million Ospraie Point fun.

Or is the trend of hedge fund closings just getting started? Are the large hedge funds that have been receiving the lion share of new investment dollars from pension funds and large institutions truly offering non-correlated returns? It would seem doubtful.

"I think it's probably the first of more hedge fund closings to come, given that a significant majority of hedge funds have had negative performance this year," said Chris Orndorff, head of equity strategy at Payden & Rygel in Los Angeles.

Too large to fail? Only a matter of time!