Major Commodities Fund Closes, In Blow to Lehman
Ospraie Fund, a big commodities fund partly owned by Lehman Brothers Holdings, is closing down and will return money to investors after incurring big losses this year.
People close to the fund, which had nearly $4 billion in assets, said the losses resulted from bad bets in copper and natural gas, causing the flagship fund to lose 38% since the beginning of the year.
The closing of the fund is a big blow to Lehman, whose 20% stake in Ospraie is part of the investment-management business that Lehman is shopping to help raise capital.
Lehman's stock fell sharply in after-hours trading after CNBC reported the fund was closing.
Lehman has been trying to sell all or part of its investment-management unit, which includes the crown jewel, the Neuberger & Berman money management business, to offset what many analysts expect to be billions of dollars in additional losses in the third quarter because of soured debt assets on Lehman's books.
As reported, Lehman Chief Executive Dick Fuld is running out of time not only to keep his job as CEO but to have the Wall Street firm remain independent. The selling of Neuberger is one of the narrowing list of options available to Fuld, many believe.
Earlier Tuesday, state-owned Korea Development Bank confirmed that it was in talks with for a possible investment in the troubled U.S. bank, but other reports said the price of the deal remained an issue.
Watch Charlie Gasparino's report on Ospraie's closing on "Fast Money."
"This is aboslute shocker," John Kilduff, senior VP of Energy Trading at MF Global, and a CNBC contributor, said in response to Ospraie's closing.
Kilduff said Dwight Anderson, Ospraie's founder, has a "great track record and is considered one of the smartest guys in commodity trading. He's highly regarded."
In a deal that closed earlier this summer, Ospraie purchased ConAgra's trading arm, utilizing information from ConAgra's physical production of corn, wheat and all agricultural prodcuts to trade in the futures market.
Lehman may offer some clarity on the future of the investment management business. See video at left.
In Kilduff's opinion that gave Osperai a huge advantage, until the current losses started setting in.
A spokesman for the firm had no immediate comment about the reasons for the losses.
In recent weeks, shares of Lehman have been pounded as the investment bank tries to clean up its balance sheet and raise more capital. Most analysts believe that the firm cannot issue more stock to raise capital because of the firm's shakey finances.
CEO Fuld has also held talks with sovereign wealth funds to make a major investment in Lehman, and some analysts have suggested that Fuld might sell the firm outright.
So far none of those options have panned out, largely because of the uncertainty surrounding Lehman's future, which has many analysts predicting that a sale of all or part of the investment management business may be the only way the firm can raise capital and survive.