Artemis Hedge Fund Seeks $300 Million for Silver Boom (Update1)

Charles Supapodok, who has traded silver for six years, is seeking to raise a $300 million hedge fund to invest mainly in the precious metal after its spot price tripled since 2003.

Artemis Silver Fund, advised by Artemis Capital Management, will put 80 percent of the fund's holdings in silver, Supapodok said in a phone interview from New York. The rest will be in metals such as gold, nickel and uranium.

"I don't think we're anywhere near the top at all for silver or gold,'' said Supapodok, who will manage the fund. ``You look at the amount of metals coming out of the mines every year and the projected demand, there's a gap there for many of these commodities that's not going to be filled for several years.''

Demand for silver has outstripped supply every year since 1996, according to the Silver Institute, an industry group. Mine production grew 3 percent to 641.6 million ounces in 2005, less than the 864.4 million ounces used, with the gap filled mostly by silver scrap.

The spot price for silver has tripled from the beginning of 2003 to $14.20 an ounce, exceeding the 92 percent gain of gold and the 62 percent increase of the Dow Jones Industrial Average over the same period.

Supapodok, 38, started managing private accounts to invest in silver in 2001. The funds had an average annual return of more than 50 percent, he said. Supapodok set up Artemis Capital this year.

Silver Demand

``There is a certain element of hedge fund speculation that's brought the base metals and precious metals up to a certain height,'' said Supapodok. Still, ``phenomenal'' growth in emerging countries such as China and India is a more important trend, he said.

The world's two most populous nations are snapping up natural resources to fuel their growth. In China, the world's biggest user of copper, the economy expanded 10.7 percent last year. Silver's industrial uses include battery cathodes, switches in microwave ovens and televisions, and photovoltaic cells for generating solar energy.

Of the 80 percent of funds earmarked for silver, Artemis will invest 10 percent in an exchange-traded fund by Barclays Plc and the rest in mining stocks, Supapodok said. An exchange- traded fund tracks a particular index or security. Barclays' iShares Silver Trust has gained 9.8 percent this year.

The strategy of investing most of the funds in equities rather than the metal itself, will add uncertainty to returns, said Jonathan Barratt, managing director of Sydney-based Commodity Broking Services.

Going Long

``It puts a little bit of clouds on it mainly because you don't know which equities he's going to invest in,'' said Barratt. ``You don't know whether it's going to be exploration, or blue chips, or whether the stock tracks the silver price well.''

Hedge-fund managers and other large speculators increased their net-long position in New York silver futures in the week ended Feb. 20, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets that prices will rise, outnumbered short positions by 46,428 contracts on the Comex division of the New York Mercantile Exchange. Net-long positions rose by 2,866 contracts, or 7 percent, from a week earlier.

Artemis will charge investors a management fee of 3 percent of assets and 25 percent of any profits. Hedge funds are loosely regulated private pools of capital that allow managers to partake in gains.

Supapodok used to cover property and hotel stocks as an analyst at Deutsche Bank AG in Bangkok and formerly worked in the merger and acquisition department of Credit Suisse Group in New York.

To contact the reporter on this story: Patricia Cheng in Hong Kong at pcheng9@bloomberg.net