Hedge Funds: Still Risky Business

In the wake of Amaranth, S&P finds that certain investment practices still could undermine the new controls put on funds

Despite Amaranth's $6-billion one-week loss in September, the largest in hedge fund history, industry sources agree that the effect was little more than a blip. The fund did not default on any of its counterparty obligations, and the impact on global financial systems was essentially negligible (see BusinessWeek.com, 9/20/06, "Are There More Amaranths Lurking?"). However, the sheer size and speed of Amaranth's losses spotlight the very risky pursuit that hedge fund investing can still be.

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