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Amaranth collapse was 'easily foreseeable'

Date: Friday, October 13, 2006
Author: Patrick Hosking, Banking & Finance Editor, Tomesonline.co.uk

THE collapse of Amaranth Advisors, in which investors have lost $6.4 billion (£3.45 billion), was “anything but unforeseeable”, according to one of London’s most respected hedge fund investors.

Fauchier Partners, which manages $4.3 billion in hedge funds, yesterday said Amaranth was riddled with warning signs and listed no fewer than 11 red flags it had spotted last year, long before its collapse. While stopping short of criticising the dozens of funds of funds, which put client money in Amaranth, Fauchier made plain that alarm bells should have rung with anyone conducting the most cursory of due diligence.

Goldman Sachs, Morgan Stanley, Deutsche Bank, Man Group, Credit Suisse and Union Bancaire Privee were among the groups to sink billions of dollars of client money in Amaranth.

Fauchier is one of the longest-established fund of funds managers in London. Its co-founder Christopher Fawcett is the closest the industry has to a figurehead as chairman of the Alternative Investment Management Association.

Mr Fawcett, in a letter to clients, wrote of Amaranth: “Unforeseeable events occur with surprising regularity in financial markets . . . In the case of Amaranth, however, the problem was anything but unforseeable.”