Why Commodity Traders Are Fleeing the Business

The number of trading houses has dwindled, and the institutional, pure-play commodity hedge funds that remain are few. By Shelley Goldberg Profiting from commodity trading often requires a combination of market knowledge, luck and most importantly, strong risk management. But over the years, the number of commodity trading houses has dwindled, and the institutional, pure-play commodity hedge funds that remain, and actually make money, can be counted on two hands. Here is a list of some of the larger commodity blow-ups: 1990 – Phillip Brothers The largest and most successful commodity trading house in its day caved, triggered by copper trading 1993 – Metallgesellschaft AG The New York branch of this large German conglomerate lost $1.5 billion in heating oil and gasoline derivatives 1995 – Sumitomo Corp. Yasuo Hamanaka blamed for $2.6 billion loss in copper scandal 2001-2002 – Enron Corp. Dissolves after misreporting natural gas trades, resulting in Arthur Andersen, a ‘Big 5’ accounting firm’s fall from grace 2005 – Refco Broker of commodities and futures contracts files for bankruptcy after accounting fraud 2006 – Amaranth Advisors Energy hedge fund folds after losing over $6 billion on natural gas futures 2011 – BlueGold Capital One of the best performing

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