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Alternative Market Briefing

Arion launches copper arbitrage strategy

Thursday, March 29, 2018

Bailey McCann, Opalesque New York for New Managers:

London-based Arion Investment Management has launched a new copper arbitrage strategy. The fund will be capped at $50 million, with $15 million already seeded by an institutional investor in the US. Arion hopes to bring in new investors for the remaining $35 million.

"This is one of those classic hedge fund trades," says James Purdie Head of Investor Relations at Arion in an interview with Opalesque New Managers. "Copper is a small and well-defined market, but we've been able to build the relationships needed to understand how the two copper exchanges work and are able to take positions not many players can take."

Arion is making trading decisions based on the structural inefficiencies between the London Metals Exchange (LME) and COMEX. Copper's price in London is often either above or below that of the price in New York. Arion's ability to take a copper position and hold it based on its understanding of the two exchanges allows it to arbitrage copper pricing.

Copper prices can be heavily correlated to the equities market and are often used as a bellwether for where industrials are headed.

"This is a niche strategy, in a niche market and so it's not going to be feasible for big funds," Purdie says. "For investors that understand commodities, they immediately understand what we do. It can be a way to trade ......................

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