hedge fund Amaranth Advisors LLC has reportedly lost nearly
$5 billion in natural gas futures trading during the last
one week. The firm has reportedly told its investors that
it is aggressively reducing its natural gas exposure to
prevent further loss of capital.
was one of the largest US hedge funds with assets of around
$9.5 billion. Investors in Amaranth's funds include investment
funds managed by Deutsche Bank, Credit Suisse and Morgan
fund had heavy exposure, reportedly more than 50 per cent
of total assets, in the energy markets. Analysts say that
the fund was betting on a sustained rise in natural gas
prices because of hurricane-related supply disruptions
and other factors.
prices have declined significantly in the last one month.
The last one month has seen a sharp fall of nearly 20
per cent in crude oil prices. Natural gas prices have
also followed a similar trend, declining more than 10
per cent over the last week alone. The severity of the
fall has taken most traders by surprise and many have
reportedly made heavy losses.
funds are not open to the public for investment and are
not required to disclose their investments or trading
strategies. In earlier days they used to hedge their long
positions with short positions in the same or different
instruments and hence the name hedge funds.
strategies of hedge finds have become much more diverse
now. They are heavy traders in commodity futures and other
derivatives. They also buy bonds and assets of financially
troubled companies and sometimes even buy out entire companies
and attempt to turn them around.
funds based in the US are estimated to have more than
trillion in assets under management. Top names include
Bridgewater Associates, DE Shaw, Goldman Sachs Asset Management
and Farallon Capital. Incidentally, Farallon is a major
investor in Indian stock brokerage IndiaBulls - including
its real estate venture.