Black River Asset Management, a financial subsidiary of Cargill Inc., is shutting four of its hedge funds, the company said.
Black River, based in Hopkins, will pay out about $1 billion of the more than $7 billion it has under management to investors, including Cargill. The fund closings were prompted by falling demand from investors, said James Gruver, a spokesman for Black River.
“It is really not performance. They are fairly competitive,” Gruver said Friday. “It is really a lack of investor demand, commodity-based particularly. We just found it very difficult to raise money.”
Because the four funds are closing, Minnetonka-based Cargill is withdrawing its funds from them, Gruver said. The agribusiness giant remains a major investor in Black River’s other funds and financial businesses, Cargill and Black River spokespeople say.
About 17 percent of Black River’s assets under management were Cargill investments as of February 2014, the most recent available data.
Black River, which was founded in 2003, employs 200 people worldwide, including 100 at its headquarters in Hopkins. The fund closures will result in some layoffs, though Gruver said numbers haven’t been determined. Some of Black River’s overseas offices may be closed.
Black River is part of Cargill’s financial services division, which also includes CarVal Investors, a money manager that focuses on distressed assets. Financial services is a relatively small part of Cargill’s overall business. It’s in a unit with Cargill’s industrial businesses, a division that accounted for 7 percent of Cargill’s cumulative five-year earnings in 2013, the most recent available data.
Earlier this year, the nation’s largest pension fund, the California Public Employees’ Retirement System, or Calpers, withdrew $600 million from Black River funds as part of decision to exit all hedge fund investments. Gruver said that “while you always hate to lose a large customer,” that didn’t cause the fund closures.
The hedge fund closures don’t affect Black River’s private equity business, which focuses on food, agriculture and metals and mining.
Black River caters to large institutional investors. The number of investors affected by the fund closures is in the “dozens,” Gruver said.
The Black River funds being closed are: Commodity Trading Fund, which, according to Black River, had a year-to-date return through June 30 of minus 0.7 percent; EMEA Investors Fund, a 13 percent return; Emerging Markets Fund, a 7 percent return; and Equity Opportunity Fund, a 3 percent gain.
With the move, Black River, named for a Wisconsin river on which Cargill in the 19th century invested in a logging operation, joins a growing number of investment firms in paring back on hedge funds, some of which have been poor performers.