What does a hedge fund manager do after losing $6.6bn of other people's money? Start another fund, of course, but this time tell clients that your new strategy (which happens to look a lot like the old one) will be "designed to minimise the risk associated with leverage, liquidity, credit and operations".
Even the fringe of the $2trillion hedge fund industry was unprepared for the leaked prospectus from Solengo Capital, a fund being set up by Brian Hunter, the energy trader who bet the wrong way on natural gas prices last summer and brought down Amaranth Advisors.
Hunter himself will manage "commodities volatility", an area of investing he still feels "very comfortable in" despite last year's upset.
Solengo (named after a Californian wine) is unhappy that its prospectus |
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has been leaked because it turns out that raising money from the rich is far from the sophisticated business we imagined: instead, it's not dissimilar from flogging a washing machine - a glossy brochure, pseudo-sophisticated lingo, small-print disclosures about fees and returns.
As for attracting traders, the brochure claims Solengo will be "perhaps the most attractive work environment in the hedge-fund world" - meaning they will be paid unusually well.
There is concern in some quarters that Hunter's reappearance is more bad PR for the hedge fund business. But John Meriwether, head of Long-Term Capital Management when it collapsed in 1998, made a succesful comeback, and wealth is still pouring into the industry. It was up 30 per cent last year, even though average returns fell.
FIRST POSTED APRIL 2, 2007
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