Nicholas Maounis may have overseen one of the biggest hedge fund blow-ups ever, but nearly two decades after the downfall of Amaranth Advisors, his latest venture, Verition Fund Management, has grown rapidly from just $1bn in 2019 to almost $12bn, according to a report by the Wall Street Journal.
Amaranth Advisors, once a $9bn hedge fund giant, fell apart in 2006 after a disastrous natural gas bet. The fund had been riding high on a successful energy-trading strategy led by Brian Hunter, a trader based in Calgary.
Hunter’s strategy — exploiting price differences in natural gas futures contracts—unravelled spectacularly. Over the course of a single week, Amaranth suffered $6.4bn in losses, wiping out more than 60% of the fund’s value in September 2006. While early investors in Amaranth ultimately broke even due to previous gains, the firm’s implosion remains one of the most infamous hedge fund collapses in history.
Maounis launched Verition Fund Management in 2008 with $185m and later partnered with Josh Goldstein, a former family office executive.
For years, Verition remained relatively small, with investors wary of Maounis’s past. But in 2020, as markets plunged during the pandemic, Verition delivered strong returns, attracting a flood of new capital.
Last year, the fund returned 11.6%, outperforming the 9.75% gain of the HFRI Fund Weighted Composite Index but trailing the 14.59% return of Vanguard’s 60/40 mutual fund. So far in 2024, Verition is up 2.2% through February 27, beating the S&P 500 index.
Since its inception, Verition has delivered average annual returns of 12.9%, according to an investor, with strong risk-adjusted returns and minimal correlation to broader markets.
Unlike Amaranth, Verition operates as a multi-manager platform, a model that has propelled firms like Millennium Management and Point72 to success. The fund oversees 140 trading teams, each managing a small portion of overall assets while focusing on various strategies, including Canadian convertible bonds.
Crucially, Verition has three times the number of risk managers as Amaranth and enforces stricter limits on traders, addressing past concerns about excessive risk-taking.
