After The Fall, Now What For Amaranth?
The 35%, $4 billion loss at Amaranth Advisors as a result of bad bets - made largely by firm star trader Brian Hunter --has spawned many a report on the fallout from the natural-gas stumble.
The 35%, $4 billion loss at Amaranth Advisors as a result of bad bets - made largely by firm star trader Brian Hunter --has spawned many a report on the fallout from the natural-gas stumble. Bloomberg News reports that Chicago-based Citadel Investment Group may be interested in taking over some pf the Connecticut hedge fund manager’s energy trades, a sign that things may be worse than they appear. “Normally, you would want to try to manage yourself out and improve it, stop the bleeding and then sell it in three months or something, once the crisis has passed,” energy consultant Mark Haeidcke told Bloomberg News. “To sell it in the middle of a crisis to me indicates a greater disaster.” If such a sale does come to pass, Amaranth would not be alone in trying to unload a nasty reminder of things gone wrong. Investors, who under Amaranth rules would not be able to just pull their cash on the spur of the moment, reportedly are willing to sell their holdings for less than half their value as of Aug. 31. Those reports apparently may have prompted HedgeBay to start a market just for Amaranth positions, though as of yesterday no trades had taken place.
Meanwhile, news of investor losses continues to surface. In addition to Morgan Stanley, Goldman Sachs (which according media reports may have lost $15 million of its $25 million stake), Credit Suisse and Deutsche Bank mentioned earlier, others with big investments in Amaranth include Bank of New York and Man Group, whose Man-Glenwood Lexington Associates Portfolio had $10 million Amaranth investment as of June 30 and said it could see a 25% decline in year-to-date returns because of the bad gas bets.
Perhaps most troubling is that the latest hedge fund catastrophe has added fuel to those fired up over hedge fund regulation, prompting Connecticut Attorney General Richard Blumenthal to investigate what went wrong - and call once again for tougher HF regs - and Securities and Exchange Commission Chairman Christopher Cox declaring to reporters, “Investing in certain kinds of hedge funds is risky business and not for mom and pop.” While Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee agrees, he added, “The market will regulate things. People who got burned in this latest encounter will learn by getting hurt. I don’t think you can protect everybody from their investments by law or regulation. We should try to protect the most vulnerable.”