Hedge fund Amaranth Advisers made a disastrous bet on natural gas prices that produced losses of $4 to $6 billion, once among the nation’s largest and hottest hedge funds, the hedge fund scrambled in an effort last week “aggressively reducing” their natural gas positions, the hedge fund said in a letter to investors.
Amarath did have due warning though; according to sources, the New York Mercantile Exchange warned the hedge fund a month before its extreme losses that its natural gas bets were too big.
U.S. lawmakers say Amaranth’s loss is the biggest ever by a hedge fund and is a good example a problem they are facing. Lawmakers complained that speculators were raising energy prices and avoiding oversight with trades that were not conducted on exchanges.
Amaranth, based in Greenwich, Connecticut, with $7.5bn under management, has warned investors that its main funds are down 35% or more this year. Nicholas Maounis, Amaranth’s founder, said in a letter to investors,
“We are in discussions with our prime brokers and are working to protect our investors while meeting the obligations of our creditors,”
Traders said Amaranth could cause some volatility by moving quickly to liquidate holdings to meet margin calls and possible investor redemptions. Amaranth, which employs more than 115 traders, analysts and fund managers, describes itself as a multi strategy hedge fund which invests in a “highly disciplined, risk controlled manner.”
2 Oct 2006
Sears and Controversial Hedge Fund Managers
Sears and Controversial Hedge Fund Managers
Sears Holdings Corp, headed by hedge fund billionaire Edward Lampert, is trying to offer a controversial $908-million privatization bid for its subsidiary Sears Canada Inc.
Sears is planning “seek leave to appeal” the Ontario court decision that blocked the offer. Sears Holdings Corp. has also extended until Oct. 31 its $802 million offer to buy the 46 percent of Sears Canada Inc. it doesn’t already own, leaving the door open to more extensions.
Last month the Ontario Securities Commission found the Chicago based retailer violated provincial securities law by failing to disclose support agreements with the Bank of Nova Scotia and the Royal Bank of Canada.
Edward Lampert, is set to become chairman of the combined companies, Kmart and Sears. As Kmart’s chairman, he owns nearly 53 percent of its stock through his ESL Investments hedge fund. He is also the largest shareholder in Sears. ESL holds a 15 percent stake in the retailer.
Besides stakes in Kmart and Sears, Lampert’s fund also owns large positions in car dealer AutoNation and auto parts retailer AutoZone. He has built a reputation as a one of Wall Street’s most successful and renowned hedge fund managers.
Early last year he was kidnapped at gunpoint from a parking garage at ESL’s Greenwich, Conn., offices. Four captors held him for ransom, keeping him bound and blindfolded for some 30 hours before he negotiated his own release.
Sears Holdings Corp, headed by hedge fund billionaire Edward Lampert, is trying to offer a controversial $908-million privatization bid for its subsidiary Sears Canada Inc.
Sears is planning “seek leave to appeal” the Ontario court decision that blocked the offer. Sears Holdings Corp. has also extended until Oct. 31 its $802 million offer to buy the 46 percent of Sears Canada Inc. it doesn’t already own, leaving the door open to more extensions.
Last month the Ontario Securities Commission found the Chicago based retailer violated provincial securities law by failing to disclose support agreements with the Bank of Nova Scotia and the Royal Bank of Canada.
Edward Lampert, is set to become chairman of the combined companies, Kmart and Sears. As Kmart’s chairman, he owns nearly 53 percent of its stock through his ESL Investments hedge fund. He is also the largest shareholder in Sears. ESL holds a 15 percent stake in the retailer.
Besides stakes in Kmart and Sears, Lampert’s fund also owns large positions in car dealer AutoNation and auto parts retailer AutoZone. He has built a reputation as a one of Wall Street’s most successful and renowned hedge fund managers.
Early last year he was kidnapped at gunpoint from a parking garage at ESL’s Greenwich, Conn., offices. Four captors held him for ransom, keeping him bound and blindfolded for some 30 hours before he negotiated his own release.
China's Banking Chairman warns of Hedge Fund risks.
At the end of April 2006, there were altogether over 28,000 banking institutions in Mainland China. The total assets of the banking industry registered nearly RMB40 trillion, accounting for more than 90 per cent of the total financial assets in the Mainland.
In 2005, 72 foreign banks from 21 countries have established 254 operational entities in the Mainland. Their total assets amounted to $88 billion. In addition, hedge funds and non banking financial institutions, including finance companies affiliated to enterprise groups, trust & investment companies and financial leasing companies are now organizing business re-engineering by actively drawing experiences from their counterparts in Hong Kong.
In short, the Mainland banking industry as a whole has been moving forward on the right track.
But China’s banking regulatory head said steps are being taken to regulate the increasingly powerful $1.2 trillion hedge fund industry,
“Regulators in all countries should strengthen the monitoring of hedge funds and be on alert against any counterparty and liquidity risks they introduce,” Liu Mingkang, head of China Banking Regulatory Commission, said in a statement.
The notice followed meetings that Liu held with his counterparts from Singapore, Italy, Germany, Thailand and Hong Kong from September 16 to 26. Liu suggested that regulators should exchange information about hedge funds promptly to make sure their trading does not cause regional or global economic instability.
Liu noted the increasing activity of hedge funds in Asian countries including China, India, Singapore, Hong Kong and Thailand.
His suggestion comes days after U.S. hedge fund Amaranth Advisors disclosed the biggest hedge fund loss ever, about $6 billion, on wrong-way natural gas market trades.
In 2005, 72 foreign banks from 21 countries have established 254 operational entities in the Mainland. Their total assets amounted to $88 billion. In addition, hedge funds and non banking financial institutions, including finance companies affiliated to enterprise groups, trust & investment companies and financial leasing companies are now organizing business re-engineering by actively drawing experiences from their counterparts in Hong Kong.
In short, the Mainland banking industry as a whole has been moving forward on the right track.
But China’s banking regulatory head said steps are being taken to regulate the increasingly powerful $1.2 trillion hedge fund industry,
“Regulators in all countries should strengthen the monitoring of hedge funds and be on alert against any counterparty and liquidity risks they introduce,” Liu Mingkang, head of China Banking Regulatory Commission, said in a statement.
The notice followed meetings that Liu held with his counterparts from Singapore, Italy, Germany, Thailand and Hong Kong from September 16 to 26. Liu suggested that regulators should exchange information about hedge funds promptly to make sure their trading does not cause regional or global economic instability.
Liu noted the increasing activity of hedge funds in Asian countries including China, India, Singapore, Hong Kong and Thailand.
His suggestion comes days after U.S. hedge fund Amaranth Advisors disclosed the biggest hedge fund loss ever, about $6 billion, on wrong-way natural gas market trades.
SEC worried about Hedge Funds
In an article by Marketwatch it was reported that Securities and Exchange Commission enforcement director Linda Thomsen, told a Senate panel that insider trading by hedge funds is “an area of significant concern” to the SEC and to lawmakers.
In the prepared testimony to the Senate Judiciary Committee, Thomsen told the panel the SEC has brought five insider-trading cases this fiscal year involving hedge funds, out of 44 total insider trading cases.
The SEC is developing new ways to monitor hedge funds following a court’s voiding of its authority to register hedge fund advisers.
The enforcement director recently said the agency is going to focus on how hedge funds and broker-dealers interact, and that broker-dealers should report insider trading by the funds.
Federal securities regulators are planning to meet with organizations like the NASD and the New York Stock Exchange to discuss ways to possibly beef up their joint fight against insider-trading, the Securities and Exchange Commission official said.
In the prepared testimony to the Senate Judiciary Committee, Thomsen told the panel the SEC has brought five insider-trading cases this fiscal year involving hedge funds, out of 44 total insider trading cases.
The SEC is developing new ways to monitor hedge funds following a court’s voiding of its authority to register hedge fund advisers.
The enforcement director recently said the agency is going to focus on how hedge funds and broker-dealers interact, and that broker-dealers should report insider trading by the funds.
Federal securities regulators are planning to meet with organizations like the NASD and the New York Stock Exchange to discuss ways to possibly beef up their joint fight against insider-trading, the Securities and Exchange Commission official said.
Ex-Hedge Fund manager pleads Not Guilty
The Securities and Exchange Commission filed a complaint against Hilary L. Shane in the United States District Court for New York this May, alleging that Shane committed insider trading and registration violations by short selling 122,900 shares of Compudyne in October 2001, prior to the public announcement, but the ex-hedge fund manager has plead not guilty to the charges of insider trading.
Shane, 39, former hedge fund manager at First New York Securities, appeared in U.S. District Court in Manhattan and was released on her own recognizance. She has been charged with five counts of securities fraud and each count holds a maximum sentence of 20 years.
According to the press release, it is stated that usually in a PIPE offering, investors commit to purchase a certain number of restricted shares from a company at a specified price and the company agrees, in turn, to file a resale registration statement so that the investors can resell the shares to the public.
But the Commission’s complaint alleges that on Oct. 8, 2001, the hedge fund manager agreed to purchase shares in the PIPE offering for her personal account and for one of the hedge fund accounts she managed. Shane agreed both orally and in writing to keep the information confidential. The following morning, before the public announcement, Shane began short selling CompuDyne securities in both her personal account and the hedge fund’s account. Shane continued short selling CompuDyne shares, selling the same number of shares, covering all the short sales with the shares obtained in the offering making substantial profits for both accounts.
The total illegal profit from the exchange was $315,000 and the hearing on the criminal charges before Judge Naomi Reice Buchwald is scheduled for Oct. 10. She has also been permanently barred from associating with any NASD registered firm and will pay more than $1.45 million to settle NASD and Securities and Exchange Commission (SEC)
Shane, 39, former hedge fund manager at First New York Securities, appeared in U.S. District Court in Manhattan and was released on her own recognizance. She has been charged with five counts of securities fraud and each count holds a maximum sentence of 20 years.
According to the press release, it is stated that usually in a PIPE offering, investors commit to purchase a certain number of restricted shares from a company at a specified price and the company agrees, in turn, to file a resale registration statement so that the investors can resell the shares to the public.
But the Commission’s complaint alleges that on Oct. 8, 2001, the hedge fund manager agreed to purchase shares in the PIPE offering for her personal account and for one of the hedge fund accounts she managed. Shane agreed both orally and in writing to keep the information confidential. The following morning, before the public announcement, Shane began short selling CompuDyne securities in both her personal account and the hedge fund’s account. Shane continued short selling CompuDyne shares, selling the same number of shares, covering all the short sales with the shares obtained in the offering making substantial profits for both accounts.
The total illegal profit from the exchange was $315,000 and the hearing on the criminal charges before Judge Naomi Reice Buchwald is scheduled for Oct. 10. She has also been permanently barred from associating with any NASD registered firm and will pay more than $1.45 million to settle NASD and Securities and Exchange Commission (SEC)
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