Calgary trader's move costs company

Discussion in 'Wall St. News' started by Cdntrader, Sep 20, 2006.

  1. Calgary trader's move costs company

    UPDATED: 2006-09-19 18:04:42 MST

    Natural gas swings lead to $5-billion loss


    Big bets on natural gas by a Calgary energy trader have lost his company about $5 billion US in the span of a week, putting the future of the hedge fund he works for in doubt.

    In a letter to investors this week, Connecticut-based Amaranth Advisors said year-to-date losses may top 35% of its capital, or roughly $3 billion US.

    “Last week, the Amaranth multi-strategy funds experienced significant losses in their energy-related investments following a dramatic move in natural gas prices,” Amaranth said in the letter.

    According to the Wall Street Journal, 32-year-old Calgarian Brian Hunter — who heads up the energy desk for the fund — was ahead about $2 billion US for the year at the end of August as a result of his natural gas trades.

    But when supplies reached record levels, natural gas futures plunged to a two-year low last week, resulting in a $5 billion US hit for Hunter and Amaranth.

    As a result, Amaranth said in the letter it was “aggressively reducing” its natural gas exposure and “working to protect our investors while meeting the obligations of our creditors.”

    The volatility in the natural gas market which resulted in last week’s massive loss is also what allowed Hunter to take in billions of dollars over the years.

    As of April, he was up $2 billion US and then in May he was stung with a loss of nearly $1 billion US, but he gained that back through the summer before the $5 billion US setback struck, said the Wall Street Journal.

    Named Canada’s top-earning trader by Trader Monthly earlier this year, Hunter took in an estimated $75 million-$100 million US in 2005 and he generated $800 million US in profit for Amaranth.

    Amaranth rewarded his returns by letting him leave the New York area and set up a Calgary office in Bankers Hall.

    A rival hedge fund also reportedly tried to hire Hunter away from Amaranth by offering to pay up front his estimated yearly bonus of $10 million US.

    But the star trader, who reaped huge profits following Hurricanes Katrina and Rita, is not without his detractors.

    Hunter filed a lawsuit with Deutsche Bank after leaving the company in 2004, claiming he was defamed and his bonus was withheld.

    The departure followed years of run-ins with superiors regarding major profit and loss swings.

    More recently, critics charged he made moves which were too large to get out of if the market turned.