Fund loses $8.7b in month, calls it a day

The Sydney Morning Herald ^ | 10/2/06

[verum ago]

AMARANTH Advisors, the $US9.2 billion hedge fund that lost $US6.5 billion ($8.7 billion) in less than a month, is preparing to shut down.

Nicholas Maounis, its founder, sent a letter to investors last night informing them that the fund was suspending all redemptions for September 30 and October 31, "to enable the Amaranth funds to generate liquidity for investors in an orderly fashion, with the goal of maximising the proceeds of asset dispositions".

Investors have been meeting Amaranth executives throughout last week, many demanding the return of their money.

[verum ago]

oops.

[Night Hides Not]

I guess that means there won't be much left over for bonuses.

[taxcontrol]

Better put some ice on that.

[the invisib1e hand]

...and another 32 year old turk gets a book contract.

[happinesswithoutpeace]

lol.

"bet aggressively on natural gas."

And lost..lost..lost.

[1rudeboy]

Back-of-the-envelope calculation indicates the fund lost more than $414 million per business day in September. Bonuses only kick in at a loss of $500 million per day. Sorry.

[Toby06]

Some days suck more than others.

The dude that ran this fund made enough last year to retire. Punk.

[FreePaul]

I guess that means there won't be much left over for bonuses.

That was probably the first priority. After that come the employees and investors.

[Old Professer]

""to enable the Amaranth funds to generate liquidity for investors in an orderly fashion, with the goal of maximising the proceeds of asset dispositions"."

Translation, we're going to dump these turkeys before they turn off the lights and leave the spare change on the floor.

[SauronOfMordor]

The essence of hedge funds is that they promise high returns in exchange for potentially insane risk. Anybody remember the Long-Term Capital Management hedge fund debacle? LTCM went down in a big way, so big that the Fed had to step in to deal with LTCM's inability to fulfill its obligations to other investors, so that it wouldn't bring down the whole economy

[dighton]

bet aggressively on natural gas

BANG! went the money.

[verum ago]

"bet aggressively on natural gas."

and natural gas aggressively beat the $hit out of the fund in response

[JennysCool]

VERY good!

[Gaffer]

Yeah! he probably did, but he should serve a few ass-banging jail time years for his mistakes...

[Wally_Kalbacken]

The list of hedge fund disasters is too long to print, but this one had a nice twist in that it came from an excess of pessimism. So far, I have not read any hyper sympathetic portrayals of Amaranth investors who were poor blind widows and orphans, but it has to be just around the corner. Funny how otherwise intelligent people can expect 2-3x the returns of the market, but with no more risk.

[jas3]

The essence of hedge funds is that they promise high returns in exchange for potentially insane risk.

Actually the opposite is true. *MOST* hedge funds promise above market returns with LESS risk, measured as volitility, standard deviation, Sharpe ratio, maximum drawdown, etc.

What these articles don't tend to cover is the thousands of funds which outperform thier benchamarks by several hundred basis points every reporting period will little variation. Those funds are far more typical than Amarinth.

[SAJ]

Sorry, Sauron, the Fed never ''stepped in'' in the LTCM debacle, except to the extent that Bill McDonough convened an assemblage of the major investment banks and bankers, including our good friend (cough) now-Governor Jon Corzine of Goldman Sachs, in order for them to step in and bail out LTCM.

Not one penny of either Fed money (yes, unlike the US gov't, the Fed has its own assets) or taxpayer money was involved in the LTCM bailout.

[LibLieSlayer]

The more that this happens, the harder it will be for these same fund managers to drive oil futures up again. Losing 8 plus billion dollars in a month will kill that market dead.

LLS

[MineralMan]

"Nicholas Maounis, its founder, sent a letter to investors last night informing them that the fund was suspending all redemptions for September 30 and October 31"

I'll bet it sucks to be him.

[verum ago]

Amaranth's energy desk, run by a young trader, Brian Hunter, bet aggressively on natural gas. When certain prices fell during September, the fund found itself in positions too big to liquidate.

I think it sucks even more to be Mr. Brian Hunter