MotherRock

MotherRock was an energy sector hedge fund, one of the biggest traders of natural gas derivatives in New York, with assets of around $430 million at one point.^[1] It closed in August 2006, the prime cause of which was attributed to the high volatility in natural gas valuations in the commodities market. While the high volatility took its toll on MotherRock, its leveraged positions exacerbated the situation and eventually led to a loss of around $230 million in June and July, 2006.^[2]

The fund was started by J. Robert Collins, with Conrad Goerl and ex-NYMEX vice president John D'Agostino in early 2005.^[3]

Senate Findings

When investigating sudden price movements in the natural gas markets, and specifically the role Amaranth Advisors played in these movements, it was ascertained that Amaranth's aggressive trading was the only reason for MotherRock's collapse.^[4][5]

In a larger picture, it was found that Amaranth could distort market prices through large trades. On July 31, 2006, Amaranth's trading caused a 72% jump in the price spread that directly affected MotherRock's positions so badly that the latter could not meet its margin calls. MotherRock folded soon afterwards.

References

1. ^ Liz Moyer (2006). "Energy Hedge Fund Bites The Dust". http://www.forbes.com/business/2006/11/10/ritchie-hedge-fund-shutters-biz-cx_1110ritchie.html. Retrieved 2007-12-19. ^{[dead link]}
2. ^ Staff Reporters (2006). "MotherRock Cries Uncle". http://www.thestreet.com/_googlen/newsanalysis/energy/10301570.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA. Retrieved 2007-12-19. 
3. ^ Alistair Barr (2006). "MotherRock hedge fund shutting down: WSJ". http://www.marketwatch.com/News/Story/91c6sWLJ6WmsdMmWBZRnWx3?siteid=google&dist=TNMostMailed. Retrieved 2007-12-19. 
4. ^ "Excessive Speculation in the Natural Gas Market", United States Senate Permanent Subcommittee on Investigations, June 25, 2007
5. ^ Matthew Leising (2007). "Amaranth Trading Led to MotherRock Loss, Senate Report Says : Bloomberg". http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEeMFC2u8rWM.