Goldman Sachs Hires Previous Amaranth Traders
Amaranth Advisors, LLC. is officially dead, but I'm glad its employees were taken good care of.
"In another sign of Wall Street's intense interest in hedge funds, brokerage firm Goldman Sachs Group Inc. is hiring 17 members of the team that traded credit for the now-defunct Amaranth Advisors LLC, according to people familiar with the matter. The group will become part of the alternative-asset-management business at Goldman Sachs Asset Management, which houses the Wall Street firm's hedge-fund investments and has $139 billion of its $629 billion in total assets under management. Amaranth collapsed in mid-September when concentrated bets on natural gas went wrong. But the fate of Amaranth's nonenergy assets and its people shows that the demise of the fund, with losses of $6.5 billion, has hardly dented the hope that hedge funds can deliver outsize gains in a low-return world ..." Full StoryEconomists Saw Risks In Hedge Funds
It is only a matter of time before the next hedge fund blowup hits us. This time we were lucky since Amaranth didn't bring a rippling effect like LTMC.
"More than half of respondents in the latest WSJ.com economic survey -- 23 out of 41 who answered the question -- said regulation and supervision of hedge funds is too light; 16 economists said it was "just right" and two said it was "too tough." About 60% said hedge funds pose a risk to financial markets. "We just don't know if they're dangerous," said Diane Swonk at Mesirow Financial, and when it comes to financial markets the "unknown is unacceptable." The explosive growth of hedge funds and their aggressive use of borrowed money have raised alarms about whether a financial crisis could set off a chain reaction of hedge-fund failures that could cause chaos in the financial system. Hedge funds, investment pools for wealthy investors ..." Full StoryPhilippe Jabre To Open New Hedge Fund In Switzerland
The prominent hedge fund manager Philippe Jabre is creating a new life in Geneva after fined by the British authorities. For hedge fund investors, it might be too much to take a leap of faith and bet on one individual for consistent returns, though.
"Philippe Jabre, a prominent former hedge-fund manager at GLG Partners LP, has arranged financial backing to open a large hedge fund in Geneva, away from the U.K.'s market regulator that fined him for market abuse in February, a person familiar with the matter said. The fund, which could raise more than $2 billion, has commitments from investors and will be backed by at least one bank, the person said. Swiss bank UBS AG will act as the fund's prime broker, according to the person familiar with the matter. In February, Britain's Financial Services Authority fined Mr. Jabre and GLG £750,000 ($1.4 million) each in connection with improper trading in the securities of Sumitomo Mitsui Financial Group Inc. Mr. Jabre appealed the FSA ruling but later ..." Full StoryGoldman Sachs Is The Largest Hedge Fund Giant
Goldman Sachs's growth in asset management is just stellar.
"In a sign that hedge fund investing is becoming more and more of a game for the big guys, Goldman Sachs Asset Management, with $21 billion in hedge fund assets, tops the list of the world's 100 biggest hedge fund firms according to Alpha Magazine's annual ranking released this morning. Alpha is part of Institutional Investor, and its Hedge Fund 100 list, compiled since 2002, has become a benchmark tool for investors trying to identify who the top hedge fund players are in dollar terms. Last year's top-ranked firm, San Francisco-based Farallon Capital Management, fell to number four, despite a $4 billion rise in assets. Goldman has seen its asset size increase by 85% each of the past two years. In 2004, the firm was ..." Full StoryAmaranth To Cut Half Of Staff
In the latest development of the Amaranth soap opera, half of the hedge fund's staff is laid off.
"Stricken hedge fund group Amaranth Advisors LLC said it is laying off about half its staff to cut operating expenses as it liquidates its portfolio in the wake of the worst hedge fund loss ever. Charlie Winkler, Amaranth chief operating officer, said in a statement late Thursday the Greenwich, Connecticut-based firm is starting an "initial reduction" of about 200 to 250 staff out of more than 400. But the firm made it clear that most staff would go, although it didn't give a time-frame. Amaranth sent letters to more than 50 top hedge funds and other financial institutions this week to solicit jobs for its staff, where it has found more than 200 open positions. "We expect that our employees will soon find new and ..." Full StoryThe Real Reason Amaranth Failed
The Slate article hit the right point: it is the compensation system for hedge fund operators that drives reckless behaviors in hedge fund managers and causes the catastrophic failures like Amaranth.
"The real risk facing hedge-fund employees is that they won't make a killing. The average base salary (pre-bonus) for a hedge-fund peon is about $150,000—a lot of money in the real world, but chicken feed in this one. If hedge-fund peons don't help their bosses make a killing, they don't get big bonuses, and they often get fired. If the bosses don't make a killing, meanwhile, they don't get big bonuses and they often get fired by clients, who aren't paying massive hedge-fund fees to earn bank interest. The way to keep your job and get rich in the hedge-fund business is to generate gains—on which you collect "success" fees that usually range from 20 percent to 50 percent. It doesn't matter whether the gains ..." Full StorySponsors
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