HEDGE HOGS

A Wall Street insider–turned–investigative journalist explains the collapse of the high-risk hedge fund Amaranth LLC and how it affected small businesses, pension funds and the price of natural gas across North America.

After working two decades on Wall Street, Dreyfuss quit in 2004, alarmed at the emphasis on obscene profits for hedge fund traders, whose greed had begun infecting managers at supposedly more conservative, safe mutual funds. As the author searched for the best way to expose the hedge fund industry, she became increasingly aware of Amaranth, which, in 2006, went from billions of dollars of assets to corporate death nearly overnight. Dreyfuss' research into the collapse suggested to her that she could tell the complicated saga for a lay readership by focusing on two men: Brian Hunter, the Amaranth trader whose risky deals in natural gas trading caused the collapse, and rival John Arnold, at a different firm and viewing the natural gas market in an entirely different way from Hunter. The result is a story about not only greed, but also hubris, the lack of government regulation over many aspects of Wall Street, the high-consequence ignorance of investors seduced by astronomic-seeming hedge fund profits, and the apparent failure of the sad lessons to stick. Hunter refused to cooperate with the author; Arnold cooperated in a limited manner. Nonetheless, Dreyfuss managed to locate telling details for the narrative by relying on post-collapse hearings in the Senate, as well as two federal regulatory agencies entering the fray too late to prevent the painful losses. The author also persuaded numerous friends and foes of Hunter and Arnold to talk in detail about what they saw and heard in the months and years leading up to the collapse.

A well-crafted investigation for nonspecialists about an obscure, needlessly arcane corner of Wall Street.