Trafigura Launches PE Fund

Commodities trading house Trafigura is planning to double the size of its fund arm Galena with the launch of a new private equity fund and the roll out of a macro fund to outside investors, Reuters reported, citing an article in the Financial Times. Galena currently has about $1.8 billion under management. Chief Jeremy Weir told the FT he wanted to grow the fund arm into a $4 billion-plus business to capitalize on the opportunities created by the withdrawal of bank lending, Reuters wrote.

(Reuters) – Commodities trading house Trafigura is planning to double the size of its fund arm Galena with the launch of a new private equity fund and the roll out of a macro fund to outside investors, according to an interview in the Financial Times.

Jeremy Weir, chief executive of Galena, which currently has some $1.8 billion under management, told the FT he wanted to grow the fund arm into a $4 billion-plus business to capitalise on the opportunities created by the withdrawal of bank lending.

Slated for launch early next year are a private equity fund focused on the mining sector and a macro fund focused on commodities, which Galena has been running internally with seed capital from Trafigura.

Weir said he also wanted to raise an additional $300 million before the end of the year for its commodity trade finance fund, as the French banks which dominate that market reduce their activities.

“If the banks are in a distressed situation and need to sell assets, then there will be some opportunities,” Weir told the Financial Times.

Galena’s commodity trade finance fund was set up in September 2011. The low volatility long-only credit fund invests in debt instruments related to global commodity trade flows.

Many distressed debt hedge funds were set up in 2009 and 2010 to take advantage of the economic downturn, but have been frustrated by banks’ reluctance to write down their assets. The sovereign debt crisis is finally bringing matters to a head and should lead to more forced sales.

Specialist finance funds have also been set up to advance loans to small companies struggling to secure finance via the usual banking channels.

Galena’s new private equity vehicle is expected to spend $50 million to $200 million to buy minority stakes in small firms, helping to close the finance gap left by the banks.

Galena was set up in 2004 to exploit Trafigura’s commodities knowledge to deliver absolute returns for investors.

Its products include a metals-focused fund, an energy fund, a special situations fund that invests in both mining and energy, and the commodity trade finance fund. (Reporting by Claire Milhench; editing by James Jukwey)