In January this guy launches a hedge fund to invest in metals

By Frik Els / December 08, 2015 / www.mining.com / Article Link

Tuesday was another bleak day on commodity markets. The prices of crude oil, iron ore and industrial and precious metals all declined pushing a number of commodities to fresh multi-year lows.

The world's major mining companies were trading even weaker than their wares with stock valuations of the top tier reaching decade and sometimes record lows.

The commodities market is a contrarian's dream at the moment, but so far few investors that trade on these principles have taken the plunge.

In fact over the past three years 12 commodity asset managers have closed up shop in addition to the big banks closing down their commodity trading arms.

This week at least one high-profile hedge fund is sticking its neck out saying the metals market have lost touch with fundamentals.

The $2 billion Orion Mine Finance Group announced it is launching a new hedge fund in January to trade industrial and precious metals (and eventually equities).

Oskar Lewnowski, the founder and chief investment officer of Orion tells Bloomberg "there are three factors driving commodities: momentum-driven financial flows, physical fundamentals and macro events":

"For a long time, metals were driven by financial flows, be it mining-orientated banks, commodity hedge funds, CTAs [Commodity Trading Advisor] and even retail equity investors," Lewnowski said in an interview in London.

"With those guys out, we are back to fundamentals. And that's an environment in which we can do well."

Lewnowski, which spun Orion out of his Red Kite fund in 2013 to invest in junior mining firms, is also willing to put a date on a turnaround:

"The turnaround is going to come in 2018," Lewnowski said. "The peak price cycle was in 2011 and these cycles tend to last seven years."

His top pick? Nickel.

Which is perhaps not that surprising considering it's the second worst performing commodity after iron ore this year. And perhaps the one steelmaking raw material that has decoupled from fundamentals the most.

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