Tuesday, September 19, 2006

Amaranth Fades or How to Lose $5 Billion in a Week

While hedge funds have been in the news a lot lately as one of the "hot" investment choices, Amaranth hedge funds' recent meltdown serves as a reminder that there's no such thing as a sure bet--even among the "smart money" which had invested over $9 billion as of the beginning of September. It seems that Amaranth placed bad bets on natural gas futures, which dropped sharply in early September.

According to the Wall Street Journal,

At the end of August, trading natural gas, he was up approximately $2 billion for the year. Then [energy trader] Mr. Hunter lost roughly $5 billion, in about a week. His losses savaged returns for Amaranth, dragging its assets under management down to $4.5 billion from $9 billion at the start of September.

Ouch! In checking out their website, I found it more than a little ironic that they had a page on "Our Name" (which in the last day or so is no longer linkable from their home page but is still viewable here). Amaranth apparently comes from the Greek word amarantos, which means "unfading." Hmmm. Looks like a name change might be in order.

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