US - The US$7.7bn San Diego County Employees Retirement Association (SDCERA) has filed a law suit against Amaranth Advisors claiming securities fraud after the hedge fund's collapse wiped out millions of its investment.
Former Amaranth gas trader Brian Hunter was singled out for prosecution along with three officers in attempts to recover more of the losses incurred by the hedge fund.
SDCERA board of trustees chairman David Myers said they had trusted Amaranth officers’ assertions of competency.
“Instead, as we state in the suit, they turned our money over to Mr Hunter, who in my opinion was an absentee rookie trader located thousands of miles from Amaranth’s office.”
SDCERA maintained the investment in natural gas futures which led to the fund’s downfall was a result of excessive and unbridled speculation.
It also held this was directly contrary to assurances made by the hedge fund that it would be diversified and risk controlled.
Myers continued: “We filed the lawsuit to correct the wrong committed against SDCERA and its members.”
Amaranth repaid the pension fund $48.2m of the $175m initial investment in January.
Despite the hedge fund collapse, SDCERA earned nearly $1bn in 2006, nearly five percentage points above its 8.25% target.
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