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Rogers Says More Funds May Collapse After Amaranth (Update1)
By Madelene Pearson
Feb. 5 (Bloomberg) -- Jim Rogers, who predicted the start of the commodities rally in 1999, said more hedge funds may collapse after the demise of Amaranth Advisors LLC and losses by metals-trading hedge fund Red Kite Management Ltd.
``There are lots of hedge funds that are going to be in trouble,'' Rogers told journalists at a briefing in Sydney today. He didn't know which funds may be affected or when. ``We're going to see many, many more explosions.'' Rogers also forecast a shakeout amongst some private equity groups.
Amaranth collapsed in September after losing a record $6.6 billion because of wrong-way bets on natural gas prices. Red Kite Metals, part of a $1 billion hedge fund run by RK Capital Management LLP, lost about 30 percent in January as metals prices tumbled, two investors in the fund said today.
``I don't know who has got what positions and in what, but I know when some of them start blowing up, it's going to have huge ramifications,'' Rogers said. ``When Amaranth blew up, it drove natural gas down to absurd prices and it was a spectacular buying opportunity for those that were still solvent and had their wits about them.''
Rogers, 64, created a series of commodities indexes and last month predicted oil will rise to $100 a barrel. He's in Australia briefing clients of UBS AG. The Rogers International Commodity Index, which more than doubled in the past five years, has dropped 11 percent in the past six months. Copper has declined 39 percent since rising to a record on May 11 last year, and oil is down 25 percent since its July 14 record of $78.40 a barrel.
`Too High'
Global offers by buyout firms rose to $730 billion last year, according to Bloomberg data, almost triple the amount announced in 2005.
``There's too much money and they are paying too high prices and leveraging themselves too much,'' Rogers said. ``There's going to be a gigantic shakeout when that whole mess starts coming apart. This has to end badly.''
Amaranth Advisors returned more than half of its remaining capital to investors in the fourth quarter as it sold off assets, founder Nicholas Maounis told clients in a Jan. 9 letter.
Red Kite's troubles came after a 9.4 percent decline in copper last month, said an investor who declined to be identified because details of the fund's performance are confidential. David Lilley, a London-based partner who on Jan. 20 said he was bullish on copper, would neither confirm nor deny the loss in an e-mail today.
Hedge funds are largely unregistered pools of capital that let managers participate substantially in gains on investments. Hedge funds globally control more than $1.3 trillion, more than double the figure five years ago, according to Hedge Fund Research Inc. in Chicago.
Rogers, chairman of Beeland Interests Inc., traveled the world by motorcycle and car in the 1990s researching investment ideas for his books, which include ``Adventure Capitalist'' and ``Hot Commodities.'' He said he had no money invested with hedge funds.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net ;
Last Updated: February 5, 2007 12:05 EST
Rogers Says More Funds May Collapse After Amaranth (Update1)
By Madelene Pearson
Feb. 5 (Bloomberg) -- Jim Rogers, who predicted the start of the commodities rally in 1999, said more hedge funds may collapse after the demise of Amaranth Advisors LLC and losses by metals-trading hedge fund Red Kite Management Ltd.
``There are lots of hedge funds that are going to be in trouble,'' Rogers told journalists at a briefing in Sydney today. He didn't know which funds may be affected or when. ``We're going to see many, many more explosions.'' Rogers also forecast a shakeout amongst some private equity groups.
Amaranth collapsed in September after losing a record $6.6 billion because of wrong-way bets on natural gas prices. Red Kite Metals, part of a $1 billion hedge fund run by RK Capital Management LLP, lost about 30 percent in January as metals prices tumbled, two investors in the fund said today.
``I don't know who has got what positions and in what, but I know when some of them start blowing up, it's going to have huge ramifications,'' Rogers said. ``When Amaranth blew up, it drove natural gas down to absurd prices and it was a spectacular buying opportunity for those that were still solvent and had their wits about them.''
Rogers, 64, created a series of commodities indexes and last month predicted oil will rise to $100 a barrel. He's in Australia briefing clients of UBS AG. The Rogers International Commodity Index, which more than doubled in the past five years, has dropped 11 percent in the past six months. Copper has declined 39 percent since rising to a record on May 11 last year, and oil is down 25 percent since its July 14 record of $78.40 a barrel.
`Too High'
Global offers by buyout firms rose to $730 billion last year, according to Bloomberg data, almost triple the amount announced in 2005.
``There's too much money and they are paying too high prices and leveraging themselves too much,'' Rogers said. ``There's going to be a gigantic shakeout when that whole mess starts coming apart. This has to end badly.''
Amaranth Advisors returned more than half of its remaining capital to investors in the fourth quarter as it sold off assets, founder Nicholas Maounis told clients in a Jan. 9 letter.
Red Kite's troubles came after a 9.4 percent decline in copper last month, said an investor who declined to be identified because details of the fund's performance are confidential. David Lilley, a London-based partner who on Jan. 20 said he was bullish on copper, would neither confirm nor deny the loss in an e-mail today.
Hedge funds are largely unregistered pools of capital that let managers participate substantially in gains on investments. Hedge funds globally control more than $1.3 trillion, more than double the figure five years ago, according to Hedge Fund Research Inc. in Chicago.
Rogers, chairman of Beeland Interests Inc., traveled the world by motorcycle and car in the 1990s researching investment ideas for his books, which include ``Adventure Capitalist'' and ``Hot Commodities.'' He said he had no money invested with hedge funds.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net ;
Last Updated: February 5, 2007 12:05 EST