@@ -1,1 +1,1 @@ - +<br>By Jamie McGeever<br> <br>ORLANDO, Fla., June 28 (Reuters) - Buy and [http://leonbets-zerkalo-bk.buzz "http://leonbets-zerkalo-bk.buzz] hold, maximum long.<br> <br>That has basically been the strategy for commodity hedge funds for the last couple of years, but it is fast losing its luster.<br> <br>Crude oil, industrial metals and a range of agricultural commodities are down significantly from their peaks earlier this year - in some cases by up to 50% - as rising interest rates increase the likelihood of U.S.<br><br>and global recession.<br> <br>For all that hedge funds are supposed to be quick-thinking, nimble operators with the freedom and flexibility to go short as well as long - they are the smartest guys in the room, after all - the reality is rather different.<br> <br>Many are trend-spotting momentum players, betting on an asset appreciating in value and running with it.<br>This approach is not all that different from any conventional buy-and-hold, long-only fund.<br> <br>Going long - essentially a bet that a particular asset will rise in value - has been extremely lucrative in the commodities space thanks to the post-pandemic global economic recovery, subsequent supply-chain and bottleneck squeeze, and supply issues emanating from the Russia-Ukraine war.<br> <br>Hedge fund industry data provider Preqin's commodities strategies index rose 13.8% from January through May, more than four times the 3.0% rise in the benchmark macro index, and three times the macros strategies index rise of 4.5%.<br> <br>Similarly, rival industry data provider HFR's commodity index was up 12.1% in the first five months of the year, the main contributor to the (total) macro index's 9.35% gain. Commodities is a constituent part of the broader macro index.<br> <br>But almost all of that impressive performance - 10.57% of it - was accrued in the first quarter.<br><br>The index lost 0.46% in May, its biggest monthly fall since November 2020.<br> <br>Thomas Thornton, founder of research firm Hedge Fund Telemetry, says a lot of funds have been caught out by the recent price decline across the commodity complex, which is eating into their previous gains.<br> <br>"Commodity hedge funds don't short enough. They don't hedge enough. They're basically momentum traders," Thornton said.<br> <br>"Hedge funds have chased performance, chased commodities higher. They have absolutely crushed it. But this last move down has really shaken some funds," he added.<br> <br>LONG, LONG, LONG<br> <br>Second-quarter and first-half performance figures will be released in early July.<br><br>The HFR commodity index has posted only one quarterly loss since 2018, and that was a 0.57% decline in Q1 2020 at the onset of the COVID-19 pandemic.<br> <br>It is unlikely to fall that much in Q2, but the peak definitely seems to have passed.<br> <br>Brent crude oil futures are down around 20% from their March high, and benchmark London Metal Exchange copper futures last week hit their lowest level since February 2021.<br>Copper has lost around a quarter of its value since hitting a record high in March.<br> <br>Other industrial metals are also sliding sharply - tin fell 25% last week alone, its biggest weekly fall since at least 2005, and is now 50% off its March high.<br> <br>The Bloomberg agriculture index fell more than 7% last week, its biggest fall since 2011.<br><br>The industrial metals index is down 25% in the April-June period, on track for its worst quarter since 2008 and second-worst since the index was launched over 30 years ago.<br> <br>Speculators active in Commodity Futures Trading Commission futures are waking up to the shift.<br>Funds sold oil in the latest week at the fastest rate in 15 weeks as the prospect of a U.S. recession sooner rather than later continued to intensify.<br> <br>Saxo Bank's commodity analysts said on Monday that the total CFTC net long position across 24 commodity futures they track fell 5% to a 22-month low of 1.5 million lots in the last week.<br><br>The biggest reductions were in WTI crude oil, natural gas, grains and sugar.<br> <br>"Worries about growth and with that demand for commodities helped trigger long liquidation in energy and grains together with additional short selling in copper," they wrote on Monday.<br> <br>The opinions expressed here are those of the author, a columnist for Reuters.<br> <br>Related columns:<br> <br>- Funds sell oil at fastest rate for 15 weeks as economic outlook worsens (June 27)<br> <br>- Funds trim bullish CBOT grain bets ahead of steep selloff (June 27)<br> <br>- Rate blitz a reminder the Fed doesn't target GDP (June 21)<br> <br>(By Jamie McGeever in Orlando, Fla.<br><br>Additional contribution from Mike Dolan in London Editing by Matthew Lewis)<br>