Brian Hunter (trader)
Encyclopedia
Brian Hunter is a Canadian natural gas trader for the now closed Amaranth Advisors
hedge fund
. Amaranth, which had over $9 billion in assets, collapsed in 2006 after Hunter's gamble on natural gas
futures market went bad.
. Hunter gained experience at Calgary based TransCanada Corp.
before moving to New York to join Deutsche Bank
in May 2001. There, he made $69 million for the bank in his first two years. By 2003, Hunter was promoted to head of the bank's natural gas desk. In December 2003 Hunter's trading group lost $400 million in a single week in an excessively risky trade. In New York state court lawsuit, Hunter ascribed the loss to "an unprecedented and unforeseeable run-up in gas prices," meaning Hunter's failure to foresee the risk of his own trade rendered him blameless for its consequences. Hunter also blamed Deutsche's trading software for allowing him to take large gambles. Finally Hunter said he had earned $40 million for the bank during 2003, and therefore not only was he not responsible for the loss, he actually deserved a bonus. Deutsche Bank denied the allegations and he subsequently was let go from the firm.
. Nicholas Maounis, founder of Amaranth Advisors, refused to let Hunter go. Maounis named Hunter co-head of the firm's energy desk and gave him control of his own trades. In 2006 his analysis led him to believe that 2006-07 winter's gas prices will rise relative to the summer and fall - accordingly Hunter went long on the winter delivery contracts, simultaneously shorting the near (summer/fall) contracts. When the market took a sharp turn against this view, the fund was hard pressed for margin money to maintain the positions. Once the margin requirements crossed USD 3 billion, around September 2006, the fund offloaded some of these positions, ultimately selling them entirely to JP Morgan and Citadel for USD 2.5 billion. The fund ultimately took a $6.6 billion dollar loss and, had to be dissolved entirely.
Amaranth and Hunter were subsequently accused by the Commodity Futures Trading Commission
of conspiring to manipulate natural gas prices. When a 2-day congressional hearing found Hunter not guilty of pushing up prices, and thus adversely affecting end consumers of the gas, CFTC framed accusations against Hunter for trying to push the prices too low and FERC framed similar ones, but going one step further, accused Hunter of being able to successfully do so.
In 2007, Hunter attempted to organize a new hedge fund, Solengo Capital Partners. However, his efforts were thwarted by regulatory agencies due to his previous questionable trading practices. Shortly after finding his new fund wrapped up in regulatory red tape, Hunter sold Solengo's assets to Peak Ridge Capital Group and was hired by the firm as an adviser to its Commodity Volatility Fund. In 1Q 2008, the fund was up nearly 49% while many other hedge funds suffered losses.
Hunter is currently the target of a $30 million fine to be levied by the Federal Energy Regulatory Commission
in connection with the alleged manipulation of natural gas prices in 2006. In December 2007, Hunter sought to prevent the FERC from taking any action against him for his participation in trading in the natural gas futures market. A federal judge denied his request.
Amaranth Advisors
Amaranth Advisors LLC was an American investment adviser managing multi-strategy hedge fund founded by Nicholas Maounis and headquartered in Greenwich, Connecticut. The firm had up to $9 billion in assets under management and collapsed in September 2006 after losing in excess of $5 billion on...
hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
. Amaranth, which had over $9 billion in assets, collapsed in 2006 after Hunter's gamble on natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
futures market went bad.
Early life
Hunter grew up near Calgary and earned a master's degree in mathematics from the University of AlbertaUniversity of Alberta
The University of Alberta is a public research university located in Edmonton, Alberta, Canada. Founded in 1908 by Alexander Cameron Rutherford, the first premier of Alberta and Henry Marshall Tory, its first president, it is widely recognized as one of the best universities in Canada...
. Hunter gained experience at Calgary based TransCanada Corp.
TransCanada Corp.
TransCanada Corporation is a major North American energy company based in Calgary, Alberta, developing and operating energy infrastructure in North America. Its pipeline network includes approximately of pipeline and connects with virtually all major gas supply basins in North America...
before moving to New York to join Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
in May 2001. There, he made $69 million for the bank in his first two years. By 2003, Hunter was promoted to head of the bank's natural gas desk. In December 2003 Hunter's trading group lost $400 million in a single week in an excessively risky trade. In New York state court lawsuit, Hunter ascribed the loss to "an unprecedented and unforeseeable run-up in gas prices," meaning Hunter's failure to foresee the risk of his own trade rendered him blameless for its consequences. Hunter also blamed Deutsche's trading software for allowing him to take large gambles. Finally Hunter said he had earned $40 million for the bank during 2003, and therefore not only was he not responsible for the loss, he actually deserved a bonus. Deutsche Bank denied the allegations and he subsequently was let go from the firm.
Amaranth
In April 2005, Hunter was, reportedly, offered a $1 million bonus to join SAC Capital PartnersSAC Capital Partners
SAC Capital Advisors is a $14 billion dollar group of hedge funds founded by Steven A. Cohen in 1992. The firm employs approximately 800 people across its offices located in Stamford, Connecticut and New York City with international satellite offices...
. Nicholas Maounis, founder of Amaranth Advisors, refused to let Hunter go. Maounis named Hunter co-head of the firm's energy desk and gave him control of his own trades. In 2006 his analysis led him to believe that 2006-07 winter's gas prices will rise relative to the summer and fall - accordingly Hunter went long on the winter delivery contracts, simultaneously shorting the near (summer/fall) contracts. When the market took a sharp turn against this view, the fund was hard pressed for margin money to maintain the positions. Once the margin requirements crossed USD 3 billion, around September 2006, the fund offloaded some of these positions, ultimately selling them entirely to JP Morgan and Citadel for USD 2.5 billion. The fund ultimately took a $6.6 billion dollar loss and, had to be dissolved entirely.
Amaranth and Hunter were subsequently accused by the Commodity Futures Trading Commission
Commodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
of conspiring to manipulate natural gas prices. When a 2-day congressional hearing found Hunter not guilty of pushing up prices, and thus adversely affecting end consumers of the gas, CFTC framed accusations against Hunter for trying to push the prices too low and FERC framed similar ones, but going one step further, accused Hunter of being able to successfully do so.
In 2007, Hunter attempted to organize a new hedge fund, Solengo Capital Partners. However, his efforts were thwarted by regulatory agencies due to his previous questionable trading practices. Shortly after finding his new fund wrapped up in regulatory red tape, Hunter sold Solengo's assets to Peak Ridge Capital Group and was hired by the firm as an adviser to its Commodity Volatility Fund. In 1Q 2008, the fund was up nearly 49% while many other hedge funds suffered losses.
Hunter is currently the target of a $30 million fine to be levied by the Federal Energy Regulatory Commission
Federal Energy Regulatory Commission
The Federal Energy Regulatory Commission is the United States federal agency with jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates...
in connection with the alleged manipulation of natural gas prices in 2006. In December 2007, Hunter sought to prevent the FERC from taking any action against him for his participation in trading in the natural gas futures market. A federal judge denied his request.
External links
- "Amaranth's Slide Began With Offer to Keep Star Trader" - Bloomberg.com. December 6, 2006
- "Brian Hunter: from hero to zero in two years" - profile in MoneyWeekMoneyWeekMoneyWeek is a weekly investment magazine that covers financial and economic news and provides commentary and analysis across UK and global markets...
- "Ex-Amaranth Trader Makes Good, Possibly" - New York Times Dealbook. April 11, 2008
- "Ex-Amaranth Trader Hunter Helps Deliver 17% Gain for Peak Ridge" - Bloomberg.com. May 19, 2008