Although Galtere invests in equity, bond and currency markets, commodities underpin Haugerud’s decisions.
“We have a commodity lens through which we view every trade,” she says. Last year, she shorted Chile’s peso when she thought copper was heading lower. Copper futures fell 20 percent in the second half.
Haugerud is unique in the world of commodities-focused hedge funds — a woman from a Midwestern farm whose $600 million hedge fund is beating some of Wall Street’s top players. Female managers oversee just 3 percent of the $2 trillion in hedge-fund assets.
Commodities have proved a tricky business in the past 18 months. Concerns over China’s growth, Europe’s economy and Iran’s nuclear ambitions have made predicting price swings tougher.
Clive Capital, a $3.3 billion London hedge fund that invests in oil, currencies and farm commodities, lost 3 percent in July. Fortress Investment said in May it would close its $500 million commodities fund after shedding almost 13 percent in four months amid bets on oil and metals. BlueGold Capital Management, which soared 200 percent in 2008 on rising oil prices, closed in April after tumbling 34 percent last year.
“Fundamental analysis doesn’t always work, because of the political environment,” says Marcus Storr, head of hedge funds at Feri Trust, which manages about $20 billion.
Arpad Busson, chairman of EIM, a fund-of-funds firm, says Haugerud’s 30 years of trading commodities and currencies help her overcome setbacks.
“She has strong stamina and does deep homework,” says Busson, who invests with her. “She has the kind of experience in commodities that very few people have.”
Haugerud says commodities, especially agricultural products, will outperform stocks and bonds in the next two decades.
In today’s economic climate, which she calls “inverse stagflation,” interest rates are low and money is plentiful, yet growth is anemic. Since 1982, commodity prices had tripled, as of the end of July, while stocks had soared 11-fold. Now, she predicts commodities and real assets such as farmland will appreciate while stocks and bonds stagnate. Corporations won’t be able to pass rising costs to consumers, which will hurt share prices.
So far, she has been right. For the five years ended in August, the commodities benchmark S&P GSCI Spot Index climbed 36 percent compared with a 4.6 percent drop for the S&P 500-stock index.
“This is a regime change from the dominance of stocks and bonds,” she says.