After the broker/dealer's bankruptcy, fund managers are learning about counterparty risk - the hard way
By Carolyn Sargent
With strong returns and a ballooning asset base, Amber Capital Investment Management had great plans for the future. Its sleek, high-design offices on the 57th floor of the 59-story Citigroup Center offer sweeping views of Manhattan and - as a long hallway of empty offices attests - plenty of room for more staff.
But in a few short weeks, Amber's world has turned upside down. The firm, which at its peak last year managed $7.2 billion, lost money earlier this year and was in the midst of restructuring when Lehman Brothers, its prime broker, declared bankruptcy. Between $300 million and $500 million is now caught up in Amber's London prime brokerage account - a serious chunk of the roughly $2.1 billion the firm now manages.
Amber thought it was protected, having taken the...