excessive borrowing taken on by hedge funds to profit from often minute movements in the markets.

Analysts estimate that in order to fund his positions, Hunter was borrowing $8 for every $1 of Amaranth's own funds. When the bets went in his favour, he could pay back the debt and keep the rest of the profit for Amaranth. Last week, the inverse happened. The bets went against him and his borrowing amplified his losses.

Some economists believe hedge funds improve the efficiency of the financial markets by introducing competition, new ideas and liquidity. Amaranth's collapse, however, strengthens the sceptics, who share the belief of the great investor Warren Buffett who, after observing the lavish salaries hedge fund managers paid themselves, said these funds were no more than a compensation structure dressed up as an industry.