There could be huge losses in energy trading this year spread across many funds. Look at the top earners from trader monthly. Most of them are energy guys or funds. Its easy to make it when the trend is up. When the trend changes and you average down you get killed. Just wait till T Boone drops 2 billion. The compensation strategy relative to risk in hf's is so silly its hilarious. What is going to happen when the markets experience contagian and the credit markets start to really come under pressure. There are a lot more illiquid investments than natural gas'. The whole system is going to blow up at some point. Congrats to ameranth investors you paid enormous fees and compensation to have someone play with your money like it was monopoly.
"What is going to happen when the markets experience contagian and the credit markets start to really come under pressure. " Obviously when that happens the market will go up.
Check out this link and notice who number who around number 40 http://www.trade2win.com/boards/archive/index.php/t-19392.html
Is it not a good thing that these vultures are getting killed trying to kite the price of energy? Who do you think they were trying to steal the money from? George Bush?
Good Year.. Make $75 million. Bad Year.. Fund Closes. They are probably laughing at all the investors now. RANK: 29 (TIED) Brian Hunter CITY: Calgary, Alberta FIRM: Amaranth Advisors AGE: 32 Shunned by Deutsche Bank a few years ago, Hunter landed on both feet. Within six months of joining Amaranth, he had made the Greenwich, Connecticutâbased fund $200 million. In 2005, Hunter was certainly among the top natural-gas traders in the world -- or, at the very least, the most buzzed-about. Having uprooted a few years back from his native Calgary to the New York area, Hunter has done so well that his employers granted his wish to move back to western Canada, where Amaranth opened an office for him and his team. Rumor has it that Hunter made Amaranth an estimated $800 million off his book, mainly natty-gas derivatives positions but also some other energy dabblings. If he snagged even 10 to 15 percent of that, Hunter was quite the gatherer in 2005. ESTIMATED INCOME: $75 â $100 MILLION
As far as investors loosing money, there should be no worries there. There are people that have too much money and 5% a year in t-bills is not enough. They allocate small portions of their fortunes across many funds fully aware of blow up possibility, but they come ahead well over all. Fund managers take all these risks because it is OPM, sometimes they get greedy and start throwing their own cash in the pot, that does cloud judgment, but they all come ahead. All these blow up stories do little damage to managers net worth. Yes, Hillibrdn net assets when from 500mil to 50mil when LTCM went down, but they opened a new fund relatively fast. It is a win/win situation to all. As far as the skills, who knows. Maybe learning some fancy option terms, knowing how to use them in conversations and being a somewhat decent trader all you need in order to qualify as head trader in those funds. redduke
http://articles.moneycentral.msn.com/Investing/CNBC/TVReports/HedgeFundDropsFiveBillionDollars.aspx I love the last line "They prided themselves on their risk management."