MotherRock
Encyclopedia
MotherRock was an energy sector hedge fund
, one of the biggest traders of natural gas
derivatives
in New York, with assets
of around $430 million at one point. It closed in August 2006, the prime cause of which was attributed to the high volatility
in natural gas
valuations in the commodities market.
While the high volatility took its toll on MotherRock, its leveraged positions exacerbated the situation and eventually led to a loss of around $230 million in June and July, 2006.
The fund was started by J. Robert Collins, with Conrad Goerl and ex-NYMEX vice president John D'Agostino in early 2005.
played in these movements, it was ascertained that Amaranth's aggressive trading was the only reason for MotherRock's collapse.
In a larger picture, it was found that Amaranth could distort market prices through large trades. On July 31, 2006, Amaranth's trading caused a 72% jump in the price spread that directly affected MotherRock's positions so badly that the latter could not meet its margin call
s. MotherRock folded soon afterwards.
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...
, one of the biggest traders of 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...
derivatives
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
in New York, with assets
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
of around $430 million at one point. It closed in August 2006, the prime cause of which was attributed to the high volatility
Volatility (finance)
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...
in 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...
valuations in the commodities market.
While the high volatility took its toll on MotherRock, its leveraged positions exacerbated the situation and eventually led to a loss of around $230 million in June and July, 2006.
The fund was started by J. Robert Collins, with Conrad Goerl and ex-NYMEX vice president John D'Agostino in early 2005.
Senate Findings
When investigating sudden price movements in the natural gas markets, and specifically the role Amaranth AdvisorsAmaranth 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...
played in these movements, it was ascertained that Amaranth's aggressive trading was the only reason for MotherRock's collapse.
In a larger picture, it was found that Amaranth could distort market prices through large trades. On July 31, 2006, Amaranth's trading caused a 72% jump in the price spread that directly affected MotherRock's positions so badly that the latter could not meet its margin call
Margin Call
Margin Call is a 2011 American independent drama film, written and directed by J.C. Chandor. The film has an ensemble cast that includes Kevin Spacey, Demi Moore, Paul Bettany, Jeremy Irons, Zachary Quinto, Stanley Tucci, Simon Baker, and Penn Badgley...
s. MotherRock folded soon afterwards.