![]() ![]() Anyone found in breach of LME rules could be subject to disciplinary proceedings.” Red Kite said in the court filing that staff from the two Barclays’ divisions also shared information when they socialized together. “The LME has strict rules regarding market manipulation and abuse. The LME, owned by Hong Kong Exchanges and Clearing Ltd, declined to comment specifically on the legal case, but referred to its regulations. The bank sought to “manipulate the LME by ‘ramping’ prices in a manner favorable to Barclays” during closing trading, the hedge fund said in the court filing. “Futures Clearing was on a different floor to the Commodities Division, in a segregated area of the floor with specific entry restrictions,” Barclays said in its defense document. were able to and did anticipate the Red Kite Funds’ future market behavior,” the court filing said.īarclays denied that its traders were able to access Red Kite’s confidential information. “Being able to see the Red Kite funds’ orders and open positions, traders with the Commodities Division (of Barclays). ![]() Red Kite said in the court filing that Barclays’ proprietary traders were able to see the hedge fund’s confidential trading positions on the London Metal Exchange (LME) that were being executed by another division of Barclays.Īs a result, Barclays traders executed trades based on that inside knowledge which resulted in profits for Barclays but damaged Red Kite’s stance, the hedge fund said. The Red Kite Group, which has hedge funds, physical trading and mining finance, has about $2 billion of assets under management, according to its website. In an outlook sent to its investors last month, also seen by Reuters, Red Kite said it expected “a great deal of uncertainty” to remain in the supply-demand of base metals for the fourth quarter through 2014.īut it also said the mine supply environment appeared “extremely conducive to lower copper prices in the 2014-2016 period”.Excess supply later pushed prices to a low of about $4,300 by early last year. This year, the Red Kite funds lost money only once in the first nine months, in June, when copper hit a 3-year low of $6,602 a tonne on the London Metal Exchange. Those familiar with Red Kite’s strategy said it changed tack then, switching to a short position on copper and other metals that helped its funds to a strong finish in 2008 as the onset of the financial crisis caused a commodities meltdown. The firm had a good two years before it was wrong-footed on bullish bets on aluminum and copper in 2007 and lost almost half its value. Relative value trades are gaining traction in metals as investors try to reduce risk by exploiting price differentials between markets such as copper and aluminum.įarmer and Lilley, both alums of copper trading legend Metallgesellschaft AG, founded Red Kite in 2004. ![]() An investor report said the fund was focused on long/short and relative value trades in base and precious metals. Red Kite’s Compass Fund, its largest with nearly $500 million under management, gained 13 percent in the first nine months. In September, metals-and-energy-focused Clive Capital, run since 2007 by Chris Levett and with about $5 billion under management at its peak, closed after three straight years of losses. Oil-focused Astenbeck, a more than $4 billion fund run by Andy Hall, who also heads up trading firm Phibro, is down 5 percent. Armajaro this week sold its lost-making physical cocoa and coffee trading unit to Switzerland’s Ecom. The flagship fund at cocoa-and-coffee-focused Armajaro which manages around $1 billion and trades most major commodities, is up just 3 percent through October. Many funds focused on the energy, metals and agricultural markets are down for the year or have eked out only small gains due to range-bound raw materials prices and tough trading conditions. Red Kite’s run of profits since 2011 contrasts with meager returns at other hedge fund firms that also have physical commodity trading operations.
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