DAAS Capital Advisors, a very large Multi Strategy Hedge Fund company founded in 2002 had achieved an annual return of around 18% since its inception and had managed to show a growth in its Assets under Management to around $2 billion. In 2005, the fund started exploring opportunities to invest in other hedge funds and its first such investments was in Amaranth. Amaranth Advisors was a Famous Multi Strategy Hedge Fund which gained popularity for its extremely good performance in beating the Market return in recent years. The main strategies followed by Amaranth were using Arbitrage Opportunities, Energy Trading. Most of the Profits of Amaranth was mainly due to its trading in Energy Sector (Primarily Natural Gas). This made DAAS Capital to invest $80 million in Amaranth Advisors at the end of 2005. In August 2006, Amaranth’s assets had grown to $9.2 billion, including $2.17 billion in year to-date profits especially from its energy and commodities portfolio. This in turn, made DAAS’s Initial Investment of $80 million in Amaranth to grow more than $100 million by the end of August 2006. But, soon after this profit making, Amaranth faced a loss of around $6 billion by September 20 and its management announced that it was in the process of liquidating Amaranth’s Positions and initiating shut down of its operations. This sudden downfall of Amaranth created a loss of approximately $40 million to $50 million to DAAS Capital Advisors.
Dave NeelamKavil who is one of the higher officials in Amaranth had asked a new joiner, Sebastian Nensi, to work on this strategy failure and come out with a report stating what might have gone wrong with respect to Amaranth strategy and its position on Energy Sector that is responsible for a loss of $6 billion and ultimately resulted in its collapse.
Objectives
To analyze the different Positions that Amaranth would have taken up in the