There's only one thing that's worse than making a bad decision and having it bite you in the backside...
Amaranth Advisors LLC, the Connecticut hedge fund that lost billions of dollars in natural gas trades in recent weeks, on Wednesday took steps to disband, forging agreements to sell its energy assets and holding talks to sell other parts of the business, people familiar with the situation said.
...and that would be having someone else make one. This is sad.
Putting your money on the performance of a company is the general idea of the stock market. It's risky. You're putting your trust in the management of the company.
Greenwich-based Amaranth Advisors said in a letter late Wednesday that the fund lost about 55 percent of its year-to-date assets and about 65 percent month-to-date as of Tuesday, leaving the hedge fund’s assets below $3.5 billion.
Amaranth, which opened the year with $7.4 billion in assets, hit an August high of $9.2 billion before a slide in the value of natural gas investments.
Hedge funds on the other hand, are a different animal.
Hedge funds are aggressive investment vehicles often used by pension funds and wealthy investors.
The funds have much higher minimum investments than mutual funds and typically are much more active traders and take greater risks. Amaranth lost billions because of aggressive — and incorrect — bets on natural gas futures prices, which recently dropped.
But, you might be surprised who those "wealthy investors" are.
San Diego County invested $175 million last year with Amaranth.
New Jersey’s pension fund could lose $16 million of its $25 million it invested with Amaranth, said Orin Kramer, the chairman of the New Jersey State Investment Council. The pension fund made the investments through a private account at Goldman Sachs Group Inc. and two “fund of funds,” which are funds that invest in multiple hedge funds.
I'm starting to get that 7-Eleven slurpy brain freeze kind of feeling.
Also potentially affected is 3M Co., maker of Scotch tape and other products. Company spokeswoman Jacqueline Berry said Thursday about 1 percent of the company’s $9.2 billion pension portfolio was invested in Amaranth.
I wonder if 3M employees knew about this?
Filings with the Securities and Exchange Commission in Washington, D.C., showed that several large financial companies had invested in Amaranth, including Goldman Sachs, Credit Suisse Group and the Morgan Stanley Institutional Fund of Hedge Funds LP.
This is getting kind of scary.
The hedge fund industry has come under fire in the past for risky investments, and the SEC has moved unsuccessfully to adopt regulations. Last month, the SEC announced it will not challenge a federal appeals court ruling that overturned new SEC rules for oversight of hedge funds.
I wonder who stood in the way of that initiative?
Those who oppose regulations have long argued that hedge funds attract sophisticated investors. They say the government should focus its limited resources on mutual funds that serve far more investors of modest means.
Those "sophisticated investors" sound a lot like gamblers to me.
I guess if an individual wants to roll the dice, that's one thing. If you're talking about companies, governments and municipalities playing fast and loose with retirees and taxpayer's money, I'm not so sure.
If I were you, I'd keep my eyes on your company's pension fund.
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