Brian Hunter Helps Deliver 49% Return for Hedge Fund

Date: Monday, April 14, 2008
Author: Saijel Kishan, Bloomberg.com

April 11 (Bloomberg) -- A commodity hedge fund advised by Brian Hunter, the energy trader whose bad bets triggered $6.6 billion of losses at Amaranth Advisors LLC in 2006, returned 49 percent in the first quarter, according to two investors.

The Peak Ridge Commodity Volatility Fund, run by Boston- based private equity firm Peak Ridge Capital Group Inc., gained 6 percent last month and 103 percent since it was started in November, according to the investors who didn't want to be identified because the information is private. Peak Ridge Chief Financial Officer Shondell Sabad declined to comment.

``For some investors, Hunter's name is a red flag and they will avoid the fund,'' said Patrick Tuohy, global head of sales and marketing at HSBC Holdings Plc's alternative investment group, which invests about $55 billion in hedge funds. ``However, some may dig deeper because in the past he did deliver some spectacular returns.'' HSBC's hedge fund group is not an investor in Peak Ridge's fund.

Hunter made $1 billion for Amaranth in 2005 after he correctly wagered that natural-gas prices would increase in the wake of hurricanes Katrina and Rita. In 2006, similar bets led to the biggest-ever hedge-fund collapse.

Peak Ridge hired Hunter last year as a consultant to devise trading models and strategies for its commodity fund. The company also bought the assets of Solengo Capital Advisors, a hedge fund firm that Hunter tried to start six months after Amaranth's collapse in September 2006. Brian Maddox, a New York- based spokesman for Hunter, declined to comment.

$30 Million Fine

Peak Ridge retains full authority over the fund's trading, risk management and operations, one of the investors said. Hunter doesn't make any decisions for the fund, the investor said. Peak Ridge Chief Executive Officer Michael McNally declined to comment on the fund's performance.

A federal judge in December rejected a bid by Hunter to prevent the Federal Energy Regulatory Commission from taking enforcement action against him for trading in natural-gas futures markets. The commission, known as FERC, unveiled on July 26 a $30 million proposed fine against Hunter for his role in the alleged manipulation of natural-gas prices in 2006.

Peak Ridge was set up eight years ago and invests more than $1 billion in startup businesses and real estate. It hired 10 former Solengo workers including Sabad, a former Amaranth employee, one of the investors said.

Energy Strategy

The advance of the Peak Ridge commodity fund in the first quarter compares with a 9.9 percent gain in the benchmark Standard & Poor's GSCI Index of 24 commodity futures and a 9.9 percent drop in the S&P 500 Index of stocks. The HFRX Global Hedge Fund Index fell 2.8 percent, according to Hedge Fund Research Inc. in Chicago.

The fund, which trades mainly energy contracts such as crude oil, natural gas and power, seeks to profit from price differences by using options, which give users the right to buy or sell a security at a future date and at a preset price.

Crude oil in New York gained 5.8 percent in the first quarter, and rose to a record $112.21 a barrel on April 9. Natural gas futures jumped 35 percent in the first three months.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

To contact the reporter on this story: Saijel Kishan in London at skishan@bloomberg.net