Amaranth Collapse Slows Hedge Fund Investments During 4Q

Date: Friday, January 19, 2007
Author: Mike Gibb, Banknet360.com

Hedge fund investors were scared off by the collapse of Amaranth Advisors LLC during the fourth quarter, and slowed their deposits into the market.

Investors plowed nearly $16 billion into hedge funds during the fourth quarter, down 64% from the previous period, according to data released by Hedge Fund Research Inc. For all of 2006, $126 billion was invested, the most ever and nearly triple the amount invested in 2005.

Amaranth collapsed last September, losing $6 billion -- about two thirds of the total assets it managed -- on wrong investments in the natural gas market.

Hedge funds returned about 13% in 2006, an improvement from a year earlier, but below the 16% gain in the S&P 500 Index.