John Arnold : The natural gas guru

John Arnold came under the spotlight in 2006 after the fierce battle with Brian Hunter, Amaranth Advisors’ star trader, on the U.S. natural gas market.

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In 2006, Brian Hunter, the star trader for Amaranth Advisors, embarked on a high-level speculation on the futures price of natural gas. John Arnold then decided to take opposite positions on behalf of the Centaurus Energy fund. In both cases, the amounts involved are enormous. It is said that the loser of this colorful battle will undoubtedly not be given a second chance : the result of his positions, in worst case scenario, will be doomed because of his excessive risk taking.

In September 2006, the ax fell. It was fatal for Amaranth Advisors, who announced a loss of 6 billion and its bankruptcy at the same time.

From his side, John Arnold celebrates. His earnings would be counted for billions of dollars of profit.

But who is John Arnold?

John Arnold is no ‘amature’. Although now in his 30’s, he made his name while he was trader in the natural gas market for Enron where he had already made hundreds of millions of dollars in profit.

After Enron’s bankruptcy in 2002, this Dallas raised Texan chose to stay in Houston. He created the hedge fund Centaurus Energy, which specializes in the natural gas market, with only seed money, his first million earned at Enron.

Success was immediately knocking at his door : the actuarial yield of the Centaurus fund has always been over 50% during its 7 years in existance. John Arnold continues to successfully apply his trading method made public during the “Amaranth story” : take short positions during the year but bet big every time.

With several billion in assets under management, today the Centaurus fund only manages John Arnold’s and his close associate’s money.

Strongly opposed to the market constraints imposed by the CFTC (Commodity Futures Trading Commission), today John Arnold is attempting to avoid these regulatory limits by investing, for example, in natural gas production/exportation companies or buying physical storage capabilities directly.

Will he have as much success as in the field of futures market trading or OTC natural gas? Only time will tell. In the mean time, as every American made billionaire – ranked 91 on Forbes magazine’s 2009 list of The 400 Richest Americans with a fortune estimated at 3.4 billion dollars- he devotes part of his assets, aided by his wife Laura, in philanthropic activities.

RF January 2010

Article also available in : English EN | français FR




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