Amaranth investors should have known risks, says Edhec analyst

In a paper on the hedge fund's collapse, Hilary Till wrote that the fund's general strategy was "economically defensible" although its positions were far too large for its capital base. The triggering event was a "nine-standard-deviation event" on September 15, an event Till said would have been missed by risk metrics using only recent historical data.

"Investors would not have needed position-level transparency to realise that Amaranth’s energy trading was quite risky," Till wrote, but added that greater transparency would have revealed the potential for liquidity risk.

Amaranth's founder, Nick Maounis, originally hoped to keep the fund going despite its losses, estimated at $6 billion, but announced in a letter to investors on Friday that the fund would be wound up. "Our current intention is to dispose of the remaining positions in the funds' portfolios in an orderly fashion over time," he wrote.

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