Hedge Funds

FRM blames risk management for Amaranth downfall


Financial Risk Management, a $12 billion fund of funds invested with Amaranth Advisors, told clients this week that FRM believes "that risk management is what ultimately failed."

In a September 22 letter, FRM outlined its decision to maintain an investment, but decrease exposure, in Amaranth as the hedge fund took on more risk through its energy trading group.

Amaranth, a multistrategy shop that held $9.2 billion in assets as of August, lost $6 billion in September due to a big energy bet. The energy trader responsible for the position, Brian Hunter, reportedly left the firm this week.