Analysis: Commodity funds on track for big launch year in uncertain market By Barani Krishnan NEW YORK (Reuters) - An ex-Glencore (GLEN.L) oil trader and a veteran grains merchant are among those behind the largest number of commodity fund launches in 3 years despite investor worries the multi-year rally in those markets is over. A dozen hedge funds trading raw materials derivatives on discretion were launched in the first six months of this year, the same as in the whole of 2012, data from London-based research house Preqin showed. In 2011, only seven of such funds took off, the smallest number in 5 years. The new funds are led by managers who are convinced they can be outliers in one of the toughest commodity markets in years. The funds typically begin trading with a few million dollars of the managers' own money and cash from family and friends, before seeking outside capital. The launches coincide with talk the commodities "supercycle" of the past decade has been thwarted by the slowing of China's phenomenal growth. That has added to the caution of investors who had less concern allocating to hedge funds when oil, metals and grains prices were hitting record highs a few years back. "There's certainly a mismatch now, with commodity managers seeing opportunities and investors remaining wary," said Amy Bensted, spokesperson at Preqin, which collects data on the alternative assets industry. Braving this market is former Glencore oil trader Jonathan Goldberg, who previously traded grains and metals for Goldman Sachs (GS.N). He hopes to raise $100 million for his New York-based fund BBL Commodities, sources briefed on his plan said. Goldberg is meeting potential investors to accept a minimum of $1 million from each, the sources said. Goldberg, who will trade price spreads between different crude and petroleum products, did not return an email seeking comment. Ron Anderson, who traded grains for 25 years at New York's two-century-old Continental Grain Company, in January started a discretionary trading program at County Cork LLC that looks at price disparities in soybeans and soy products on the physical and futures markets. Anderson's program is one of several run by County Cork, based in Skokie, Illinois and owned by Robert J. O'Brien Jr., a director of futures broker R.J. O'Brien. County Cork said Anderson was managing $4 million now, and had a target of $30 million by 2014. Gregory Cain, who headed the Far East business of U.K. metals hedge fund Ebullio Capital, in March launched a multi-commodity fund called GCGM Capital, which has a bias toward industrial metals. GCGM, based in Kent, U.K., did not return emails seeking comment. For investors, backing these startups means taking a calculated gamble that their money will be safe and turn a profit in the not-too-distant future. While commodity hedge funds outperformed their equity-focused peers before the financial crisis erupted in 2008, and again in 2009 and 2010 when prices rebounded, their returns have been mostly abysmal since then. The 19-commodity Thomson Reuters-Jefferies CRB index .TRJCRB is on track to its third yearly loss, falling 4 percent through July after a 3 percent drop in 2012 and an 8 percent decline in 2011. This year, the majority of commodity funds lost money every month through June, according to a closely-followed Newedge index that tracks their performance. Preqin data shows the launch of discretion-based Commodity Trading Advisors -- the official tag for commodity hedge funds -- peaked in 2008 with 38 startups, after 12 in 2007 and 18 in 2006. The market turned volatile after that, with 16 debuts in 2009; 20 in 2010 and 7 in 2011, before stabilizing with at least a dozen launches annually. Even funds that have outperformed haven't raised much. London-based Andurand Capital, started in January by oil trader Pierre Andurand, is up 50 percent on the year but has barely raised beyond its starting capital of $200 million. Andurand, making a comeback after big losses at his previous fund BlueGold, told Reuters earlier this year he hoped to raise $500 million by the first quarter at his new firm. The former Goldman and Vitol trader decided to work on his performance instead, after seeing what he was up against, said a source familiar with the situation. Andurand's 50 percent gain indirectly boosted the fund's assets to $300 million. "That performance will surely count when he goes on the road to raise money, though what he gets remains to be seen," the source said. Andurand declined comment for this article. Verulam, a metals fund in New York, run since 2009 by Andrew Suckling, will be out this fall to expand its current capital of $75 million, those familiar with its plans said. Suckling, who worked previously for prominent commodities fund Ospraie, declined comment. Some investors said they were staying off commodities due to better returns from competing asset classes like private equity. "It's been more than two years since we got into any commodity start-up or increased allocation for a commodity manager," said Mike Hennessy, managing director at Morgan Creek Capital Management, a fund-of-fund in Chapel Hill, North Carolina, which has about $7 billion under management. Fund-of-funds are among the main allocators to commodity funds, aside from pensions, endowments and other asset managers. Morgan Creek became less positive on commodities in 2011, after signs China's growth was slowing with the U.S. and European economies, and the U.S. shale energy revolution was flooding the market with oil supplies that were pressuring prices. "We are overweighted in private equity energy ventures," Hennessy said. They've been better at capitalizing on the energy revolution. Some investors are more enthusiastic about commodities, but in no rush to allocate. The second largest U.S. public pension, the $150 billion California State Teachers' Retirement System, has yet to pick managers for its commodities program three years after its board approved a $150 million allocation as a hedge against inflation. "Since inflation has been at a manageable level, the emphasis was on finding the right managers, which we are in the process of searching for," calSTRS spokesman Ricardo Duran said. The $16 billion L.A. Fire & Police Pension, Los Angeles' top retirement fund, also hasn't fulfilled a 2010 mandate to invest 5 percent of its assets in commodities, although it approved last year an actively-managed portfolio to be part of the mix. Some pensions have done exceptional work on commodities. Maryland's $42 billion state pension approved $50 million in June for Connecticut energy fund Taylor Woods Capital, its fifth commodity hedge fund allocation in 18 months. "There is some smart money poking around, but it's not diving in yet," said the marketing manager at an oil fund. This story has been corrected to remove reference to futures broker R.J. O'Brien in first para, corrects 9th para to make clear County Cork owned by a director of R.J. O'Brien and not the futures broker itself Editing by Andrew Hay