Recently, DealBreaker broke a story about former Amaranth energy trader, Brian Hunter, who is out pitching his new fund, Solengo Capital. Apparently, some of their prospectus has been floating around the internet for all to see. I guess it has reaised some eyebrows that within 6 months of Amaranth's collapse, the trader who was largely responsible for losing bets is launching a new fund. Today, CNBC reported rumors that the firm has raised $700 million already from previous Amaranth investors.
This reminds me of Long Term Capital Management and its manager John Meriwether. Only one year after LTCM's collapse, Meriwether launched another fund, JWM Partners that has reportedly over $2 billion in assets under management.
Stories like this remind me of a few key things about hedge funds and private equity. Hedge fund investors are fearless. Some may call them savvy, some may call them stupid. But there is a reason that investors must be qualified to invest in private equity. The risks cannot be spelled out more clearly - you risk complete loss of all of your investment.
Some may wonder why investors would ante up again. There are really only a few answers. One is that investors have made so much money with those previous managers and their other hedge fund investments that any losses are sustainable. The other answer is that insitutional investors are so flush with funds that need to be deployed that they can't afford not to invest.
Those of you that are out their pitching your hedge funds take this as a sign of hope. If the guys at Amaranth can do it again, so can you.
For all those people out there that are curious to what their prospectus looks like, check it out at DealBreaker.
Actually Dealbreaker didn't break the story. It was up on other blogs like NakedShorts first.
Posted by: bjl | March 30, 2007 at 03:36 AM