DealBreaker of The Year Candidate: Brian Hunter

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No list of the biggest movers and shakers of 2006 would be complete without including Brian Hunter—the once esteemed and envied energy trader who move and shook the hedge fund Amaranth right out of business. Hunter came to Wall Street from Calgary, where he had worked for a pipeline company that was getting into the energy trading business. After a tumultuous few years at Deutche Bank that ended with Hunter suing his employer, Hunter was hired by Amaranth founder Nick Maounis and Amaranth's top energy trader Harry Arora (who had come to Amaranth after the collapse of Enron to start the energy desk). For a couple of years, the Hunter and Arora team did extraordinarily well, becoming the primary source of gains for Amaranth during a period when its equity investments are said to have lagged behind its competitors.
Hunter was richly rewarded, reportedly pulling down $75 to $100 million in compensation in a single year. SAC Capital's Stevie Cohen attempted to hire Hunter away from Amaranth, and Maounis responded by making Hunter the co-head of energy trading and allowed him to move his operation up to Calgary. That was the year that Hunter bet big on natural gas futures, and won big when hurricane Katrina struck and disrupted energy supplies. Some reports say that Hunter made $1 billion for Amaranth in 2005.
Things changed in 2006 but Hunter stayed the same. Arora left to start his own energy trading fund, leaving hunter as the undisputed head of energy trading at Amaranth. He once again bet that the spreads on natural gas futures would widen. All the best forecasts were predicting another stormy summer. Al Gore had a hit movie explaining that global warming was more or less permanently transforming the Caribbean into a cauldron of hurricanes. But the storms never came to pass. The margins on gas futures contracted. Amaranth found itself forced to sell off assets to meet margin calls. Before long it was clear that the losses from Hunter's trades would bring down the hedge fund altogether.
If Hunter's story just involved the collapse of one fund, he probably wouldn't be a candidate for DealBreaker of the year. But Amaranth's collapse gave new life to calls for hedge fund regulation. Regulators were relieved that Amaranth didn't turn into another Long-Term Capital Management, the hedge fund which famously failed and required action by the Federal Reserve to bail out its creditors. But talk of "systemic risk" from hedge funds started to emerge from the mouths of regulators in the US and Europe. If the European Central Bank gets its way and creates a global regime of hedge fund registration, hedge funds everywhere will have Hunter to thank.
Value Added: It's been said that in finance that you're only as good as your last trade. But that's not true. Over the years Brian Hunter made quite a lot of money for a lot of people. Even his last, disastrous trades can be seen as providing two important lessons—that even the mighty can fall and that capital markets can thrive in the wake of a multi-billion dollar collapse.
Risk Factors: One word—Amaranth.
Should Brian Hunter be the DealBreaker of the Year? So far, Brian Hutner is up against challenges from Hank Paulson, Patricia Dunn and backdating. We invite you to let loose with your inner-most feelings in the comments section below. And if you have other candidate you’d like to nominate, please feel free to email us at tips@dealbreaker.com. (If you can use the format we’ve laid out above, all the better. If it’s a hassle, we’ll take ‘em as we get ‘em.) If we use your nomination, you’ll get a free copy of Winning: The Answers: Confronting 74 of the Toughest Questions in Business Today.

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