Ex-Amaranth COO Joins New York HF

Date: Thursday, January 17, 2008
Author: Emma Trincal, Senior Financial Correspondent, Hedgeworld.com

NEW YORK (HedgeWorld.com)—Charles Winkler, the former chief operating officer at defunct hedge fund Amaranth Advisors LLC, joined Hudson Bay Capital Management LP, a $350 million multi-strategy hedge fund run by former proprietary trader Sander Gerber.

"I talked to a lot of good hedge funds. They all had excellent investment professionals," Mr. Winkler told HedgeWorld. "I think it all came down to the chemistry I had with Sandy [Gerber]. I felt that with Hudson Bay, we had the potential to grow the platform and to attract other talented investment professionals," he said.

Mr. Winkler joined last month, a little more than a year after Amaranth, the $9 billion multi-strategy hedge fund, lost approximately $6 billion in two weeks on bad energy bets made by natural gas trader Brian Hunter. Many market observers also pointed to Amaranth's poor risk management as one of the main reasons for the firm's downfall. Amaranth accumulated a huge position in energy derivatives that was too concentrated to be hedged. There were approximately 15 people working within Amaranth's risk department.

Mr. Winkler is a hedge fund veteran who joined Amaranth in 2001 from Chicago-based Citadel Investment Group LLC. There, he worked as the COO from the spring of 1996 until he left to join Amaranth. In many ways, he played a positive role in Amaranth's liquidation. For instance, he was instrumental in engineering Citadel's purchase of a large portion of Amaranth's energy book through his relationship with Ken Griffin, Citadel's founder, said a person familiar with Amaranth. The sale of the book allowed Amaranth to meet its obligations to its prime brokers and various lenders, although not to its investors. "While investors lost between 65% and 75% of their money in Amaranth, from an operational standpoint, the liquidation process was rather smooth," said this person.

Hudson Bay, a shop with approximately 15 people, became a hedge fund in 2005 after Mr. Gerber decided to dissolve his proprietary trading firm, Gerber Asset Management. Hudson Bay now runs two hedge fund vehicles, according to the Securities and Exchange Commission: Hudson Bay Fund LP and Hudson Bay Overseas Fund Ltd.

"I trusted that Sandy would have a strong belief in the importance of risk management," said Mr. Winkler. "That's because before running his hedge fund, he was a proprietary trader managing his own account. Risk management is crucial when you run your own capital and the capital of the people who work for you."

Mr. Winkler noted that he didn't have a prior relationship with Mr. Gerber—he met him last year. He said he had several job offers in 2006 but chose Hudson Bay for the growth potential and the "prudent" investment management style.

In the months following Amaranth's default, many of the firm's alumni found jobs elsewhere, including at top firms such as Moore Capital Management, Goldman Sachs Group Inc., Highbridge Capital Management LLC and The Carlyle Group.

Scott Davidson, a former structured product portfolio manager at Amaranth, joined Carlyle to run a similar portfolio for Carlyle Blue Wave, a hedge fund unit at the private equity firm Previous HedgeWorld Story. Moore Capital Management hired more than two dozen ex-Amaranth staffers in just a few months in late 2006 Previous HedgeWorld Story. And in December Goldman Sachs brought on board Gregg Felton, who used to run Amaranth's debt investments, and 17 former Amaranth debt traders Previous Reuters Story.

David Chasman, who was handling Amaranth's energy risk management, took a job at JPMorgan Chase. He did not return a call.

Hedge fund market observers noted that the ease with which those former traders found new homes at top banks or hedge fund franchises is not surprising. Amaranth employed a lot of talent before Mr. Hunter's trades caused its destruction.

Mr. Hunter himself was about to launch his own new shop before his efforts were put on hold because of litigation by the Commodity Futures Trading Commission (CFTC) and the U.S. Federal Energy Regulatory Commission (FERC) related to his losses at Amaranth Previous HedgeWorld Story.

Mr. Winkler said he has maintained contact with several Amaranth alumni, but declined to talk about his ex-firm as Amaranth is in litigation. His move to Hudson Bay was first reported by Alternative Investment News.