Posts Tagged ‘fund managers’

Credit squeeze affecting Sentinel Management Group

Tuesday, August 14th, 2007

Sentinel Management Group, a cash management firm, has halted redemptions of its funds, which according to sources are pooled and may be more affected if a large client takes out funds. The company sent a letter to investors explaining the problems.Download file
One source believes one of the problems with Sentinel’s portfolio is that is is pooled, and if one large client pulls out, or if some paper defaults, it would affect the entire portfolio. Further, in looking at its Prime porfolio as of July 30, 2007, the average weighted maturity is 396 months, or 33 years, which is a far less liquid market. Download file. The group also has a 125 portfolio.Download file

The CME Group also made a statement that Sentinel had $1.5 billion under management, of which none was held by the CME. Sentinel is not a clearing member of CME Group or any other exchange. In its release it noted that “Sentinel provides investment advisory and investment services toinstitutional and corporate clients, including a limited number of CME
clearing member firms. Total investments under management by Sentinel are
approximately $1.5 billion. None of these funds are on deposit with CME
Clearing to support performance bond or collateral requirements. Sentinel
is registered with the Securities and Exchange Commission (SEC) pursuant to
the Investment Advisors Act of 1940, and is also registered with the CFTC
and the National Futures Association (NFA) as a non-clearing futures
commission merchant (FCM).” And that all clearing members had met their clearing obligations.”

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Amaranth aftermath

Wednesday, June 27th, 2007

A Senate committee led by Michigan Senator Carl Levin issued a report Monday claiming that excessive speculation by hedge fund Amaranth Advisors caused wild price swings in natural gas markets in 2006 and “socked consumers with higher prices.”

Levin, who is chairman of the Senate Permanent Subcommittee on Investigations, stated in a release, “It’s one thing when speculators gamble with their own money; it’s another when they turn U.S. energy markets into a lottery where everybody is forced to gamble with them.”

The report, which was the result of a nine-month study, notes that the industry regulator, the Commodity Futures Trading Commission (CFTC) was hamstrung in monitoring the activity of Amaranth because once the fund reached speculative trading limits on the regulated New York Mercantile Exchange (Nymex) Natural Gas markets, it moved positions to the Intercontinental Exchange (ICE) Natural Gas swaps markets, where there are no speculative limits.

The report stated, “At times Amaranth controlled 40% of all of the outstanding contracts on NYMEX for natural gas in the winter season (October 2006 through March 2007), including as much as 75% of the outstanding contracts to deliver natural gas in November 2006.” It went on to say that when Nymex eventually told Amaranth to reduce its positions, they simply transferred those open positions to ICE, maintaining the same exposure.

Despite the claims in the report, Amaranth trader Shane Lee testified in hearings before the committee that market moves were not the result of Amaranth activity and that Amaranth reacted to the markets, not the other way around. Recent studies by both Nymex and the CFTC have dismissed claims that fund activity was driving energy markets but they where mainly focusing on the fund benchmarked to long-only commodity indexes.

The report recommends eliminating the so called “Enron Loophole,” which exempts certain electronic energy exchanges from regulatory oversight. It also recommends increasing the CFTC budget to allow greater oversight and paying for that with a user fee imposed on commodity markets.

Efforts to increase the CFTC’s oversight of OTC energy markets have been pushed by California Senator Diane Feinstein for several years but have consistently been defeated.

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