what do people think of the amaranth saga? is this the end of the multi-strategy hedge fund?

Question

i work for one of the lkargest and amaranth has scared us all- one wrong bet and your out of the game...discuss

Answer 1

Actually it says more about the use of derivatives by people who don't have the necessary knowledge to control the risk. Any fool can roll the dice and put a massive bet on the future direction of the price of natural gas, you don't have to be a hedge fund.

Amaranth doesn't spell the end of multi-strategy hedge funds but it should mean the industry evolves. I think you will see a more realistic appraisal of risk versus reward and action by exchanges and regulators to force hedge funds to monitor their positions properly.

Very painful for the people involved but ultimately there was a ridiculous macho attitude to risk in the hedge fund industry that couldn't be allowed to continue indefinately.

Answer 2

First of all, why has the Amaranth saga scared you? I work for one of the largest brokerages in the world, it doesn't scare us.....why should it scare you?

It is just another hedge fund, Brian made some bad choices and the fund has paid for them. Rather than be scared of them, they have my sympathy.

Just remember...what goes up....must come down....what must rise must fall....