Riding coffee rally, cocoa trader Ward's niche hedge fund soars

By Barani Krishnan

NEW YORK, June 4 (Reuters) – Famed cocoa trader Anthony Ward’s niche commodities fund is up 28 percent through April, after riding the bull run in arabica coffee as a drought in Brazil, the world’s No. 1 producer, raised concerns about tightening supplies.

The gains by Armajaro Asset Management’s CC+ fund, which focuses on cocoa and coffee, is its best so far in five years after a 42-percent return in 2009, letters to investors seen by Reuters showed.

In two months, arabica prices almost doubled hitting two-year highs above $2 per lb in April.

“Coffee price movements continued to command attention with the market almost immediately attacking the previous highs,” the British hedge fund manager wrote in CC+’s investor letter for April, released in recent days.

In a February letter issued by the hedge fund, the cocoa market was deemed “comparatively sleepy” by Ward, who was dubbed “Choco-Finger” in 2010 for his massive bets in cocoa.

It is not clear how the CC+ performed in May when arabica sank 13 percent, notching up its biggest monthly loss since September 2011, as investors booked profits.

The recent double-digit gains compare with the fund’s mere 2-percent rise in 2013. New York cocoa prices rose 20 percent last year as traders worried about a looming deficit. Arabica sank as Brazil was expected to produce a bumper crop.

The CC+, a mid-sized unit in Armajaro Asset Management’s stable of six hedge funds, has historically represented about 20 percent of the group’s assets, which now stand at less than $1 billion, people familiar with the situation said. Armajaro declined comment.

Ward’s gains in coffee come as other commodity hedge funds struggle. Despite a polar vortex that swept energy prices sharply higher in the first quarter, few hedge funds in natural gas made money in that period.

On Wednesday, London-based Schroders said it was closing its Opus commodity fund, citing a “challenging market”.

(Reporting By Barani Krishnan; Editing by Grant McCool)