According to today's Wall Street Journal, "Brian Hunter, whose bad bets triggered the collapse of hedge fund Amaranth Advisors LLC, says a federal investigation into his possible involvement in an alleged multibillion-dollar manipulation of the natural-gas markets is hurting the start-up of his new fund venture."

The Federal Energy Regulatory Commission has been investigating the firm and Hunter while he tries to launch his new fund, Solengo Capital Advisers.

DealBreaker sums up Hunter's whining pretty well: "Yes, Brian, up until now, everything was going swimmingly for Huntengo. Until this. Yes, yes, THIS is the thing that will ruin Huntego's reputation. Not that bit of bad luck at Amaranth, not the less-than-stellar reference from Nick Maounis, or that TAKE NO PRISONERS lawsuit launched against a blog, no, no, it's THIS. Do you hear yourself talk? Carney might kill you tonight."

In other news, Michael Vick is upset that his new puppy-training class isn't doing well because of negative publicity in the media. Jeff Skilling says his pesky orange jumpsuit is interfering with his efforts to revive Enron.

Ex-Amaranth trader whines that investigation hurts his new fund originally appeared on BloggingStocks on Wed, 08 Aug 2007 07:45:00 EST. Please see our terms for use of feeds.

Goldman turns hedge fund disaster into a winner? originally appeared on BloggingStocks on Mon, 16 Apr 2007 12:42:00 EST. Please see our terms for use of feeds.

Over the past couple years, a variety of new hedge funds have hit the market to capitalize on the bull market in commodities. However, things have not been so good lately. After all, it was a bad bet on natural gas that sunk the $9 billion hedge fund, Amaranth Advisors.

Well, according to a report from the Wall Street Journal [a paid service], there may be some more carnage. That is, the high-flier fund, Red Kite, is apparently trying to delay investor redemptions.

The problem? The fund lost a whopping 20% in January. Basically, there a terrible bet on copper.

But, with an delay on redemptions, Red Kite can take time to unwind its positions and hopefully get better value. The issue is that investors realize there is "blood in the water" and will no doubt try to profit from the misery. Actually, this was the case with the Amaranth implosion, which turned out to be a nice payday for JP Morgan Chase & Co. (NYSE: JPM).

Actually, I wrote about this in a recent piece for BloggingStocks.com.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Another hedge fund losing its luster originally appeared on BloggingStocks on Fri, 02 Feb 2007 16:58:00 EST. Please see our terms for use of feeds.

For 2006, the hedge fund, Amaranth Advisors LLC, was definitely a black eye for the industry -- as well as an indication of the high risks of such investments. That is, back in the summer, the fund imploded as a key trader made a bad bet on the energy market.

Well, according to a report from MarketWatch, it looks like investors may have recovered 55% to 60% of the remaining capital in the fund. Unfortunately, there is still a good amount of illiquid assets that need to be worked-out.

The big beneficiaries from the mess may actually be top Wall Street firms like Goldman Sachs (NYSE:GS) and J.P. Morgan (NYSE:JPM). For example, it looks like J. P. Morgan got a big boost in trading because of its efforts to unwind half the energy portfolio of Amaranth during the fourth quarter.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Amaranth disaster not so disastrous after all originally appeared on BloggingStocks on Thu, 25 Jan 2007 15:30:00 EST. Please see our terms for use of feeds.

I recently wrote a piece for Bloggingstocks on how former employees of Amaranth - a hedge fund that melted down - had no problems finding jobs (one of the employers was actually Goldman Sachs NYSE:GS).

Well, according to the WSJ (subscription only], Amaranth's former CEO and cofounder, Nick Maounis, is thinking about starting a new fund.

It seems that prospective investors would ask about how he recently lost $6.4 billion, right? But, then again, the hedge fund world can be quite mysterious.

If he can pull it off, it would certainly be remarkable. But, hey, as seen with his investment moves at Amaranth, Maounis likes taking long shots.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

WSJ: Hedge fund blow-up no big deal?! originally appeared on BloggingStocks on Fri, 05 Jan 2007 12:45:00 EST. Please see our terms for use of feeds.

The Canadian Income Trusts meltdown has been all over the news lately, but it has received only a few mentions thus far on Blogging Stocks. Perhaps investment news north of the border simply don't make Blogging Stocks' top ten business stories of the week? But if you appreciate patriotism, allow me to demonstrate some as I add in my two cents. Sometimes, these market turmoils may prove profitable for opportunistic investors.

I've been a very disloyal Canadian investor. For the last two years, I've only batted eyes at U.S. companies while the Canadian indexes kept creeping higher. However, I've recently taken interest in beaten-down Canadian companies such as Loblaw, and Canadian oil and natural gas income trusts. My interest started with these income trusts due to their pricing issues in July and August, as well as the Amanranth hedge fund debacle. Such negative news always peaks the interest for the contrarian in me. I can't believe my new interest in income trusts has come at such a time of opportunity!

Continue reading Canadian Income Trusts: Good investment now?

Canadian Income Trusts: Good investment now? originally appeared on BloggingStocks on Mon, 06 Nov 2006 12:14:00 EST. Please see our terms for use of feeds.

Continue reading Failing up, large, on Wall Street

Failing up, large, on Wall Street originally appeared on BloggingStocks on Mon, 30 Oct 2006 12:21:00 EST. Please see our terms for use of feeds.

The Amaranth fiasco and implosions at other hedge funds raises an interesting question for hedge funds. Where's the hedge?

However, this definition has been expanded to include all types of investment strategies unrelated at all to the original definition of a hedge fund. They all do still seem to have one common characteristic - large fees! Hedge funds get paid a percent of assets under management; this can be as little as 1% but can be as high as 5% or more. That's not all though. Hedge funds also get a percent of the profits; this can vary from as little as 20% to as high as 50% or more. Not bad work if you can get it!

What do we get on average for these high fees? If the numbers compiled by Dow Jones are to be believed, not much. The returns for the last several years lag those of small cap index and in most cases do not exceed the return on long-term government bonds. This is not to say that there are not some truly gifted hedge fund managers such as Stevie Cohen. However, for the most part you are paying a lot of money for inferior performance.

Continue reading Post Amaranth question for hedge funds: Where's the hedge?

Post Amaranth question for hedge funds: Where's the hedge? originally appeared on BloggingStocks on Tue, 17 Oct 2006 14:30:00 EST. Please see our terms for use of feeds.

In the hedge fund world, death can be relentlessly quick and efficient. That's certainly the case with Amaranth Advisors LLC, which lost over $6 billion in a week.

The fund desperately tried to sell itself to Citigroup (which, by the way, wants to get more involved in hedge funds). But despite the extensive talks and negotiations, Citigroup decided to walk according to a report from the Wall Street Journal.

Now, it's just a matter of liquidating the fund.

The leader of Amaranth, Nick Maounis, wrote a letter to his shareholders about the matter. Basically, all requests by shareholders for redemptions will be suspended. This is in order to give the fund enough breathing-room to effectively sell-off the positions.

According to the letter: "We estimate that, as of Friday, September 29, 2006, the Net Asset Value of the multi-strategy funds had declined approximately 65% to 70% month-to-date and approximately 55% to 60% year-to-date."

The lessons from all this? Well, no matter how smart your team is, the market is often smarter. In the case of Amaranth, the firm was apparently too lax in its internal controls. It allowed a young trader to take huge bets on the direction of a highly volatile commodity: natural gas.

This episode also shows that mutual funds, in comparison, are actually a good investment. They are provide diversification and low costs (keep in mind that hedge funds have very high fee structures). More importantly, mutual funds are very transparent. In fact, the disclosures for investors can be overwhelming.

True, you are probably not going to make a killing from a plain-vanilla mutual fund. But, then again, you'll probably not lose your shirt, either.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

For $9 Billion Hedge Fund Amaranth, R.I.P. originally appeared on BloggingStocks on Fri, 29 Sep 2006 20:07:00 EST. Please see our terms for use of feeds.

Amaranth Advisors LLC shows the perils of fast money in the hedge fund world. While the fund had a sterling performance since 2000, things came to a stunning conclusion over the past week.

Because of risky bets on natural gas, it looked like the fund lost roughly 35% this year (ironically, one of the selling-points of this fund was its alleged focus on reducing volatility).

Well, the results have been much worse - according to a letter from the fund's leader.

You see, the fund had to unwind its positions. And, as the old saying goes, there is lots of money to be made when there is "blood in the streets." So, this week, Amaranth lost an additional $1.4 billion.

Those who bought a large amount of these positions include Citadel Investment Group, a $12 billion hedge fund, and JPMorgan Chase. This certainly gives new meaning to another old Wall Street phrase: "pass the trash."

Continue reading Mega-loser hedge fund still taking stupid pills

Mega-loser hedge fund still taking stupid pills originally appeared on BloggingStocks on Thu, 21 Sep 2006 11:55:00 EST. Please see our terms for use of feeds.