November 16, 2006

Did Amaranth Pull Down Max Re?

-- By Pushpa Sathish, Staff Writer

Speculation is rife in the hedge fund industry that Max Re Capital suffered significant losses in the third quarter of 2006 because of its investments in Amaranth Advisors. Close on the heels of Amaranth’s announcement that it had lost $6 billion on bad energy bets, the reinsurance firm said that it expected to lose $35 million because of trading losses in certain hedge fund investments.

While Max Re didn’t elaborate, scandal lovers are putting two and two together. It remains to be seen if they are left with four or five, since the company disclosed no details other than the fact that it was cutting back on the amount it had earmarked for its alternative investment portfolio. Earlier, the Bermuda-based insurance outfit invested between 20 to 40 percent of the premiums it received on hedge funds; it has decided now to set aside only 15 to 20 percent of assets for this purpose.

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