Hedge fund Mandara Capital enters crude, products mkt

Thu May 13, 2010 5:41pm BST

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* Former heavyweight bank traders build trading team

* Active in crude futures and fuel oil swaps

* Plans expansion into gamut of crude and product swaps

By Emma Farge

LONDON, May 13 (Reuters) - Hedge fund Mandara Capital, which was set up by former bank traders several months ago, has started trading crude futures and fuel oil derivatives, trade sources said on Thursday.

Mandara's chief executive Muwaffaq Salti was previously the global head of fuel oil trading with JPMorgan Chase (JPM.N). He had also worked as a trader in two other top banks in oil and commodities: Goldman Sachs (GS.N) and Morgan Stanley (MS.N).

The London-based fund has started taking positions on crude oil futures and benchmark over-the-counter (OTC) high sulphur fuel oil barge swaps in northwest Europe, five trade sources told Reuters.

"They are mainly doing liquid prompt stuff and curve plays," said a London-based fuel oil trader.

Mandara has also started trading Singapore 180-centistoke fuel oil derivatives and is active in arbitrage swaps between Europe and Asia as well as time spreads on the curve, according to the trade sources.

The fund is expected to start trading crude oil derivatives and other OTC oil product swaps in the coming months, they said.

Mandara did not respond to requests for comment. It is not clear the amount of capital the fund has under management.

The fund joins established players, such as BlueGold, which is already active in trading European oil swaps.

Hedge funds are known for taking risky directional bets in oil markets.

Three of the firm's team of four traders have joined from energy trading desks in banks, industry sources said.

Since the start of the financial crisis, many star commodity traders have moved to smaller commodities trading ventures, lured by the prospects of higher salaries, greater autonomy and less scrutiny from regulators. [ID:nN15504574]

"They could pull in a lot of clients with their experience in the banks," said a second fuel oil trader. "They could be big."

Tom Nix, former head of the O'Connor global commodities fund at UBS Global Asset Management and a seasoned trader, is a partner in the venture. (Editing by Ikuko Kurahone and James Jukwey)