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Just days after hedge fund Amaranth Advisors LLC warned investors of significant losses due to wrong-way bets in the natural gas futures arena, the ramifications of those losses on the market are slowly coming into better view. Amaranth founder Nick Maounis told investors in a letter Wednesday that the net asset value of the multi-strategy funds had declined "approximately 65% month-to-date" through Sept. 19 and "approximately 55% year-to-date." This would put month-to-date losses for the company -- which managed $9.5B as of last month -- somewhere in excess of $6 billion. While the Amaranth news was eerily reminiscent of MotherRock's demise in early August, Amaranth's rumored losses -- if confirmed -- are significantly greater. After less than two years of operation, energy hedge fund MotherRock LP said it was closing its doors following an alleged $200+ million loss in natural gas trading over June and July. "MotherRock was just a minor tremor compared to Amaranth and there could be more," said Tom Saal of Commercial Brokerage Corp. But rather than pouring over the details of these downfalls or speculating who might be next, the futures broker is consulting his clients and customers -- natural gas buyers and sellers -- how to protect themselves and even possibly take advantage of the hedge funds' impact in the market. "The behavior of the hedge funds has changed over the past several years," Saal said. "There are now trend- and counter-trend funds. The first type, trend or 'black box' funds use a very systematic approach, trading around a pre-defined model or set of technical parameters. Counter-trend, or 'discretionary' funds, are the new breed out there and they are the ones we have to take a close look at. Understanding their behavior can help you manage your risk in the futures and options markets." Saal and his colleague Ed Kennedy are hosting a workshop to discuss this and other strategies for trading and hedging natural gas purchases and sales. About the Workshop The workshop, which is typically only open to their clients, is being offered to the marketplace. It takes place October 4-5 at NYMEX.
Article Source: http://www.new.citynewslive.com
More info at: workshops.gasmart.com/hedging.
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