Hedge funds are increasing their exposure to commodities.

Bobby Jain’s new hedge fund hires talent from financial houses that trade commodities and invests a significant portion of the fund’s assets in commodities — including the physical market. Jain Global will target 15% to 20% of the roughly $5 billion it plans to raise to commodities, according to a person familiar with the matter. The fund, due to launch in July, will trade commodity derivatives before moving to physical transactions. Jain Global is on track to become one of the biggest hedge fund launches in years, and its entry into energy and metals is the latest example of investors returning to commodities. An index that tracks commodity prices rose to its highest level of the year, driven by supply disruptions, geopolitical tensions and a drive to hedge against high inflation.

-Commodity Index

Hedge funds’ entry into the commodities market is another example of how major firms are trying to replicate Citadel’s success in building commodity trading businesses with exposure to physical markets. Jain’s entry into the sector is led by the former Macquarie Group Ltd veteran. David Hochberg, with about 10 commodity portfolio managers hired to date. The plan is to start with gas and electricity in North America and Europe before moving on to other commodities and regions. The funds are particularly attracted to the storage and physical arbitrage opportunities in the gas and electricity market, with the growth of renewable energy sources, climate change and Europe’s new dependence on imported liquefied natural gas making big price moves more frequent, which is beneficial for traders.

 Junior Dealer Yulian Bonzov

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