Ebullio launches short-term commodity fund

Ebullio Capital Management said it has launched a second commodities fund, seeking to capitalise on short-term momentum plays in round-the-clock trading, including during volatile Asian hours. Ebullio spun off its eFED Commodity Futures Fund from its original Ebullio Commodity Fund, which has been trading since 2008 but made large losses in 2010 after it was forced to liquidate metals positions.
Over the past few years, Ebullio portfolio managers noticed increasing volumes on the London Metal Exchange's (LME) Select electronic platform during Asian trading hours and established a separate overnight desk. They also found that volatility was often higher and momentum stronger during Asian trading from 0100 GMT, said Gregory Cain, portfolio manager of the new fund, which was launched last month. "When the market trades in a certain direction, all the Chinese traders get involved, so it exaggerates the move," he said.
Ebullio, based in Essex east of London, expanded the strategy to cover US and European hours, creating a 24-hour trading desk. Last year, Ebullio established a separate account for its Far East desk within its existing Commodity fund and tracked its performance. Last year, it would have returned 50.7 percent if it had been a separate fund, compared to an 8 percent decline in the 19-commodity Thomson Reuters Jefferies CRB index. During January, it gained 1.3 percent compared to a 2.3 percent rise in the CRB.
The fund has the scope to trade across commodity products, although so far it has focused mainly on base metals with some trades in energy and precious metals. The majority of trades are short-term, with 80 percent intraday, 10 percent held two to seven days and another 10 percent are spread trades lasting one to seven weeks. The fund so far has $2 million in assets, with an initial capacity of $250 million.
Ebullio would like eventually to gain access to the Shanghai Futures Exchange, due to its growing volumes and active arbitrage business with the LME, and the firm is considering establishing an office in Asia in the future, Cain added. The original Ebullio Commodity Fund will remain focused on macro and fundamental strategies complemented by some physical trading in base metals.