The Collapse of Amaranth Advisors

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Case Details:

Case Code : FINC063
Case Length : 18 Pages
Period : 2000-2009
Pub. Date : 2010
Teaching Note : Available
Organization : Amaranth Advisors
Industry : Investment Banking
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"It was a total failure of risk control to put your entire business at risk and not seem to know it." ¹

- Marc Freed, Managing Director, Lyster Watson & Company², in September 2006.

"We see Amaranth as a failure in risk management and business judgment. One of the things we dislike most is the combination of illiquidity and leverage and Amaranth strongly reinforced our views."³

- David Ben-ur, Director of Research, Corbin Capital Partners⁴, in December 2006.

"Amaranth's demise is not due to some complicated quantitative reason - it's about human failing and frailty." ⁵

- Hank Higdon, Founder, Higdon Partners LLC , in December 2006.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Introduction

On August 12, 2009, US-based Amaranth Advisors LLC⁶ (Amaranth) settled a lawsuit filed against it on charges of market manipulation.

The Collapse of Amaranth Advisors - Next Page>>

1] Ann Davis, Henny Sender, and Gregor Zukerman, "What Went Wrong with Amaranth Advisors," www.post-gazette.com, September 20, 2006.
2] Founded in 1992, Lyster, Watson & Company is a New York-based investment advisory firm for hedge funds. As of September 2009, there were US$ 1.5 billion of assets under advisement.
3] Alistair Barr, "Hedge Fund Giants Thrived in 2006 as Amaranth Fell," www.marketwatch.com, December 29, 2006.
4] Corbin Capital Partners is an investment firm with expertise in alternative investments. It was founded in 1984 and is headquartered in New York.
5] Katherine Burton and Jenny Strasburg, "Amaranth's $6.6 Billion Slide Began With Trader's Bid to Quit," www.bloomberg.com, December 06, 2006.
6] Founded in 1986, Hidgon Partners LLC is a New York-based asset and wealth management firm.

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