Fund Management

Last month there was news about the hedge fund Amaranth lost 6 billion US dollars. The lead trader of the company once won a few millions by betting on natural gas to rise last year, lost half the capital this year resulting in the coming cut off of 60% employees, by using the same strategy betting on the same natural gas to rise for predicting more hurricane comes. However, as Mr. Tso from Hong Kong Economic Journal said that no one can guess about weather, fewer hurricane came this year and the price dropped a lot.

The lead trader had the responsibility about the trade because he bet on the risk of the whole fund. But the management team of the fund should have much more responsiblity on the loss because they trusted a 'once star' and allowed a guy to be able to loss more than half of the capital! Where is the risk management department of such a big fund (having 9.5 billion dollars in capial in the beginning of this year)?!