Sorry somehow seems a bit inadequate when you've just flushed away $1.29 billion of your clients' money. But Dwight Anderson, in his letter to investors, isn't giving much more explanation for his epic adventure in value destruction since the start of the year. Imagine tearing up five million dollar bills every day for eight months.

The Ospraie Management hedge fund manager played in a risky part of the forest - commodities and energy. It was the same volatile asset class that did for Brian Hunter, of Amaranth Advisors, who lost $6.4 billion in 2006 after being wrongfooted by natural gas futures.

Unlike Mr Hunter, Mr Anderson hadn't been delivering the spectacular returns that might have hinted he was taking riskier bets than was wise. The flagship Ospraie fund was producing a very decent but hardly outstanding 15 per cent a year.

We don't know precisely what burnt Ospraie's feathers and sent it into a tailspin, but it seems probable that it was badly positioned for the extraordinary reverse in energy and commodities since early July.

Fund of hedge funds managers are predicting more casualties because of the violence of the swings in prices and sentiment. It seems that many hedge funds aren't really “hedged” in any meaningful way at all. They are merely geared momentum investors. They are taking naked bets that a price trend will continue and for a time they are, usually, proved right.

Yet the boom in commodity prices has unwound dramatically in the past nine weeks. Natural gas is down 40 per cent, silver and corn are down 20 per cent. Soya beans, aluminium and copper are all down more than 10 per cent. Apart from pork bellies and sugar, there's barely a raw material that hasn't gone south.

That welcome trend will not feed through into manufactured goods prices for some time. Food price inflation is still uncomfortably high and getting higher. And British clothing retailers, preparing to press the button on their purchases of spring/summer ranges, are girding their loins for steep price increases, not least because of the drooping pound.

For some hedge funds, however, the damage is going to be irreparable. Hedge funds rarely survive a loss of more than 20 per cent. The clients are unforgiving and rush to redeem as fast as the lock-in arrangements allow.

Individual hedge fund managers are more resilient, however.

Mr Hunter is back in business. His Peak Ridge Capital Commodities Volatility fund has reportedly made a 230 per cent return so far this year by anticipating the energy downturn.

Even if Ospraie, which has $4 billion in other funds, is irreparably winged, how long before Sea Eagle Capital takes flight?

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