正文
Amaranth Advisors LLC was an American multistrategy hedge fund managing US$9 billion in assets. In September 2006, it collapsed after losing roughly US$6 billion on natural gas futures. The failure was one of the largest known hedge fund collapses in history. (See List of trading losses)
Contents
The company was founded by Nicholas Maounis and based in Greenwich, Connecticut. Amaranth means unfading in Greek.
Throughout much of the firm\'s history, convertible arbitrage was the firm\'s primary profit center. As more and more capital began flowing into the convertible arbitrage strategy during the early 2000s, trading opportunities became more difficult to find.
By 2004-2005, the firm had shifted much of its capital to energy trading. Amaranth’s energy desk was run by a Canadian trader named Brian Hunter who placed spread trades in the natural gas market. Hunter had made enormous profits for the company by placing bullish bets on natural gas prices in 2005, the year Hurricane Katrina had severely impacted natural gas and oil production and refining capacity. Hoping for a repeat performance, Amaranth wagered with 8:1 leverage that the price of the March \'07 and March \'08 futures contracts would increase relative to the price of the April \'07 and April \'08 contracts (i.e., they were long the March contracts and short the April contracts).
Unfortunately for Amaranth, they did not. The spread between the March and April 2007 contracts, for example, went from US$2.49 at the end of August 2006 to US$0.58 by the end of September 2006. The price decline was catastrophic for Amaranth, resulting in a loss of US$6.5 billion.[1].This led to a considerable debate across the financial circles and increased media attention about risk management practices that should have been adopted to prevent catastrophic incidents like losing more than 5 billion dollars within a week. [2] Historically, the spread in future prices for the March and April contracts have not been easily predictable. The spread is dependent on meteorological and sociopolitical events whose uncertainty makes the placing of such large bets a precarious matter.
The fund had over US$9 billion under management and reports indicate losses may exceed 65 percent[3]. On September 20, 2006, Reuters reported that Amaranth would transfer its energy portfolio to a third party, eventually revealed to be Citadel Investment Group and JPMorgan Chase [4]. The losses were not as threatening to the financial system as were the losses of Long-Term Capital Management, but it has led to increased pressure on the SEC to regulate hedge funds. On September 29, 2006 the founder of Amaranth sent a letter to fund investors notifying them of the fund\'s suspension, and on October 1, 2006, Amaranth hired the Fortress Investment Group to help liquidate its assets.
In 2007, Hunter founded a new hedge fund, Solengo Capital Advisors. The firm received attention in April 2007 for suing Dealbreaker.com, a website which had published Solengo\'s prospectus.
On July 25 2007, the Commodity Futures Trading Commission (CFTC) charged Amaranth and head energy trader Brian Hunter with Attempted Manipulation of the Price of Natural Gas Futures including making false statements to the New York Mercantile Exchange (NYMEX) [5]. The Federal Energy Regulatory Commission has also charged Amaranth and traders Brian Hunter and Matthew Donohoe with market manipulation[6]. The CFTC and the FERC have different, conflicting, versions of what Brian Hunter did, and are currently fighting over jurisdiction[1].
Amaranth filed a lawsuit against JP Morgan claiming US$ 1 billion in damages, on the grounds that the bank interfered in the company\'s efforts to strike a better deal with Goldman Sachs and Citadel.[7]
Contents
The company was founded by Nicholas Maounis and based in Greenwich, Connecticut. Amaranth means unfading in Greek.
Throughout much of the firm\'s history, convertible arbitrage was the firm\'s primary profit center. As more and more capital began flowing into the convertible arbitrage strategy during the early 2000s, trading opportunities became more difficult to find.
By 2004-2005, the firm had shifted much of its capital to energy trading. Amaranth’s energy desk was run by a Canadian trader named Brian Hunter who placed spread trades in the natural gas market. Hunter had made enormous profits for the company by placing bullish bets on natural gas prices in 2005, the year Hurricane Katrina had severely impacted natural gas and oil production and refining capacity. Hoping for a repeat performance, Amaranth wagered with 8:1 leverage that the price of the March \'07 and March \'08 futures contracts would increase relative to the price of the April \'07 and April \'08 contracts (i.e., they were long the March contracts and short the April contracts).
Unfortunately for Amaranth, they did not. The spread between the March and April 2007 contracts, for example, went from US$2.49 at the end of August 2006 to US$0.58 by the end of September 2006. The price decline was catastrophic for Amaranth, resulting in a loss of US$6.5 billion.[1].This led to a considerable debate across the financial circles and increased media attention about risk management practices that should have been adopted to prevent catastrophic incidents like losing more than 5 billion dollars within a week. [2] Historically, the spread in future prices for the March and April contracts have not been easily predictable. The spread is dependent on meteorological and sociopolitical events whose uncertainty makes the placing of such large bets a precarious matter.
The fund had over US$9 billion under management and reports indicate losses may exceed 65 percent[3]. On September 20, 2006, Reuters reported that Amaranth would transfer its energy portfolio to a third party, eventually revealed to be Citadel Investment Group and JPMorgan Chase [4]. The losses were not as threatening to the financial system as were the losses of Long-Term Capital Management, but it has led to increased pressure on the SEC to regulate hedge funds. On September 29, 2006 the founder of Amaranth sent a letter to fund investors notifying them of the fund\'s suspension, and on October 1, 2006, Amaranth hired the Fortress Investment Group to help liquidate its assets.
In 2007, Hunter founded a new hedge fund, Solengo Capital Advisors. The firm received attention in April 2007 for suing Dealbreaker.com, a website which had published Solengo\'s prospectus.
On July 25 2007, the Commodity Futures Trading Commission (CFTC) charged Amaranth and head energy trader Brian Hunter with Attempted Manipulation of the Price of Natural Gas Futures including making false statements to the New York Mercantile Exchange (NYMEX) [5]. The Federal Energy Regulatory Commission has also charged Amaranth and traders Brian Hunter and Matthew Donohoe with market manipulation[6]. The CFTC and the FERC have different, conflicting, versions of what Brian Hunter did, and are currently fighting over jurisdiction[1].
Amaranth filed a lawsuit against JP Morgan claiming US$ 1 billion in damages, on the grounds that the bank interfered in the company\'s efforts to strike a better deal with Goldman Sachs and Citadel.[7]
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